* CEZ holds 7 pct of MOL after brief gas plant alliance
* Shares remain on CEZ books after MOL's option expired
* Bond will have 3-1/2 year maturity
* Exchange price EUR 61.25/share
(Updates with pricing)
By Jason Hovet
PRAGUE, Jan 28 Czech utility CEZ on
Tuesday placed a 470.2 million euro ($642.93 million) bond
convertible into shares of oil and gas group MOL that
remain on CEZ's books after the Hungarian firm passed over an
opportunity to buy them back.
CEZ bought 7 percent of MOL in early 2008 to help it fight a
takeover attempt. The deal was intended to seal a strategic
tie-up of the two central European energy firms, but their plans
to jointly build gas-fired power plants have since been shelved.
CEZ said on Monday it was looking at what to do with the
7.68 million shares it still holds after MOL's option to buy
them - at a strike price far above the market level - lapsed
The bond issue on Tuesday confirms what a market source with
close knowledge of CEZ's plans had told Reuters earlier - that
it was looking at holding the MOL shares for the next three
years via a convertible bond, which would provide CEZ with
financing and keep the shares off the market.
The bond will have a maturity of 3-1/2 years and was priced
with a coupon of zero, CEZ said on Tuesday.
Buyers were lured by a premium over MOL's share price in the
The initial exchange price was set at 61.25 euros per share,
35 percent above the weighted average price of the stock in the
bond pricing period - which was 13,796.4 forints, or 45.37 euros
at the exchange rate used.
Bondholders will have the right to exchange the bonds for
shares from Jan. 25, 2017, although CEZ gave itself the right to
deliver an equivalent amount in cash for all or part of the
Settlement for the bonds is expected on Feb. 4. Barclays
Bank and Deutsche Bank are managing the issue, and HSBC and
Societe Generale are also bookrunners.
CEZ will have the right to redeem the bonds from February
2017 if MOL's share price rises more than 30 percent above the
Shares in MOL traded down 1.3 percent on Tuesday at 13,650
forints, far below the strike price on MOL's expired option
which CEZ has said was 20,000 forints.
CEZ shares were down 2.3 percent at 502.50 crowns on
Tuesday, underperforming the wider market.
Majority state-owned CEZ has said the expiration of the
option would not affect its earnings because it has been
re-evaluating the deal regularly as the MOL share price dropped
over the past years. But it said it made money from receiving a
fee from MOL for the option.
Proceeds from the bond issue will go to "general corporate
purposes", CEZ said. One analyst who asked not to be named said
the money could help support CEZ's dividend, which is expected
to fall along with profits as the company struggles with weak
($1 = 0.7313 euros)
(Additional reporting by Robert Muller; editing by Tom