Reliance Comm sells convertible bonds

HONG KONG: Reliance Communications , vying with Britain's Vodafone Group and domestic firms to buy rival Hutchison Essar, raised $1 billion through a convertible bond issue, according to a term sheet.

Reliance, the second-largest operator in the world's fastest-growing wireless market, is regarded as a front-runner, along with Vodafone, in bidding for the 67 per cent stake in number-four operator Hutchison Essar owned by Hong Kong's Hutchison Telecommunications International Ltd.

Bidding for Hutchison Essar, a joint venture between Hutchison Telecom and India's Essar group, is expected to value the firm at as much as $20 billion. Essar and India's Hinduja group are also eyeing control of Hutchison Essar.

In another move to bolster its war chest, Reliance Communications won government approval in January for a proposed issue of $1.2 billion in overseas shares.

The five-year, zero-coupon convertible bonds have a yield to maturity of 4.95 percent and a redemption price of 127.69 percent, the term sheet said. The conversion premium is 30 percent over a reference share price of 508.6378 rupees.

Reliance Communications shares closed on Monday at 515.10 rupees.

The deal was handled by HSBC and JPMorgan and follows a $500 million convertible bond sale by Reliance Communications in March 2006.

Shares in Reliance have risen 9 per cent since the start of the year, topping the 5.3 per cent gain in the benchmark Sensex Reliance shares have gained 176 per cent since a low reached last June during a sharp correction by Indian shares.

Hutchison Telecom is controlled by tycoon Li Ka-shing's Hong Kong-based conglomerate, Hutchison Whampoa