UPDATE 1-ITV sweetens bond deal ahead of deadline

Mon Jun 22, 2009 3:40pm BST

Quotes

   

* Exchange bond coupon now 10 percent, up from 9 percent

* Offers bondholders 70 percent in new bonds, rest in cash

* Shares down 2.8 percent

(Adds detail, analyst comment)

LONDON, June 22 (Reuters) - ITV's (ITV.L) bondholders have won improved terms on the British broadcaster's proposed bond exchange just two days before the offer closes.

The new bonds will pay a coupon of 10 percent rather than the 9 percent offered previously, ITV said.

"This sends a fairly challenging signal to the market," said Mark Chapman, an analyst at CreditSights.

"Since the exchange offer was first announced, market sentiment has weakened slightly and so investors may have backed away from the deal a little."

The change followed discussions with "several substantial holders" of its 2011 bonds, ITV said in a statement.

The exchange offers bondholders about 70 percent of new bonds maturing in 2014, and about 30 percent cash. The exchange may cut debt by up to 150 million euros ($208 million), ITV has said.

The "opportunistic" exchange offer will delay ITV's first large refinancing demand, allowing it more time to turn around its business, Chapman at CreditSights said.

ITV has been struggling with an industry-wide slump in advertising revenue, hitting its share price and sending its debt into "junk"-rated territory. The company owed 730 million pounds ($1.2 billion) at the end of 2008.

"The exchange offer should give ITV significantly more financial flexibility in the medium term, and increases the practical options open to it," rating agency Fitch said in response to the initial offer announcement on June 10.

ITV will not expect all eligible bondholders to take up the exchange offer, said a credit analyst who declined to be named.

"I'm sure they won't get 100 percent, but given the beneficial effects of the exchange on ITV's balance sheet, even 50 percent would be a good result," the analyst said.

ITV shares were down 2.8 percent at 35 pence at 1440 GMT (Reporting by Tom Freke; Editing by Dan Lalor) ($1 = 0.7216 euro = 0.6070 pound)