AMS Osram - comment

AMS Osram has launched a consent solicitation for its convertible bonds to amend the guarantees, making it rank pari passu with the rest of the capital structure. Holders will receive a 25bps fee once the amendment becomes effective. 

We have not seen the exact solicitation (please send if you have it), but the initial view is that the Convertibles will benefit from an additional guarantee that is currently not applicable. But at what cost? The Convertibles have some nuisance value and perhaps should stick to their static guarantees. 

The movement to the guarantee package of the Senior Notes probably makes it easier for AMS Osram to sell assets and apply the proceeds in an orderly fashion. But the flip side may allow the Company more flexibility on the use of proceeds, prioritising RCF creditors over the longer-dated bonds.

In the first place, however, this approach confirms our view that the Company is not going to redeem early the 2027 Convertibles in order to extend the RCF. The Company would not pursue this amendment if the RCF banks were insisting on dealing with the 2027 Convertibles before extending the RCF maturity.