TomTom shares drop on $600 million share issue plan

AMSTERDAM (Reuters) - Shares in Dutch navigation device maker TomTom NV (TOM2.AS) dropped more than 7 percent on Monday, reacting to the company's plan to raise 430 million euros ($600 million) in a share issue to pay down part of its debt.

TomTom shares were down 7.5 percent at 6.93 euros at 0859 GMT, underperforming a 2 percent drop in Amsterdam's blue chip index .AEX.

"The share issue should be enough for TomTom to get through the downturn," said asset manager Rob Koenders at Netherlands-based Harmony Vermogensbeheer.

As TomTom said late on Sunday, the new shares are to be sold via a combination of a private placing and a rights issue. The sum raised amounts to nearly half of TomTom's market capitalization on Friday of 934 million euros.

Debt-laden TomTom said the offering would consist of a 359 million euro rights offering and a 71 million euro private placement with two investors -- Cyrte Investments BV and Janivo Holding BV -- who will pay 6.1234 euros per share.

Both will also participate in the rights issue along with the company's founders. The rest is underwritten by a banking consortium consisting of Royal Bank of Scotland (RBS.L), Rabobank RABON.UL, ING (ING.AS), Goldman Sachs (GS.N) and Deutsche Bank (DBKGn.DE).

The share issue will help cut debt to about 700 million euros from 1.16 billion at the end of the first quarter.

"We have evaluated a number of options over the last months. This was the right structure and also the right timing to do a rights issue," Chief Executive Harold Goddijn told reporters.

Details of the rights issue will also participate, will be published after a shareholder meeting on June 30.

LOAN COVENANTS AMENDED

TomTom confirmed it had paid an amendment fee to change its debt covenants, but declined to disclose how much. "We are within our covenants and expect to remain within them," Chief Financial Officer Marina Wyatt said.

TomTom agreed its net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio would not be more than 3.5 at the end of December 2009 and June 2010.

The amount of debt repayments was increased to 210 million euros annually from 158 million previously.

TomTom is struggling under heavy debt taken on when it bought Dutch digital map maker Tele Atlas for 2.9 billion euros last year after a bidding war with U.S. rival Garmin Ltd

(GRMN.O).

TomTom shares had rallied last week, first from its unveiling of a new navigation application for Apple Inc's (AAPL.O) iPhone and on subsequent talk that the U.S. group would take a stake in TomTom.

But Goddijn said TomTom was not approached by Apple.

"The rights offering in combination with the announcement that Apple is not interested to take a stake at least will take away speculation of a bid on the shares," SNS Securities analyst Martijn den Drijver said in a note.

TomTom also updated its outlook, saying it was satisfied with its business performance in April and May but reiterated there was limited visibility on trading for the full year 2009.

Shipments of unit volumes have been moderately below TomTom's expectations, while average selling prices (ASP) were above levels achieved in the first quarter, it said.

(Additional reporting by Gilbert Kreijger; Editing by Greg Mahlich and David Holmes)

($1=.7191 euros)