28. Convertible bond 2005/2012
On October 5, 2005, Kudelski Financial Services Holding SCA issued a CHF 350 000 000 unsubordinated convertible bond due 2012, convertible into bearer shares of Kudelski SA. This bond has a denomination of CHF 5 000 nominal amount with an initial conversion price of CHF 67.76 per bearer shares of Kudelski SA with a nominal value of CHF 10. Bondholders may request conversion at any time from January 1, 2006 until September 12, 2012. The bond is callable at par value after October 5, 2010, subject to a 110% provisional call hurdle. If not converted prior to the date of maturity, the bonds will be redeemed at par value. Interest expense on the liability component of the bond is calculated on the effective yield basis using an effective rate of 3.2%.
Following the payment of an extraordinary dividend on May 30, 2007, conversion price has been set at CHF 66.98 per bearer share.
The convertible bond is recognized in the consolidated balance sheets as of December 31, as follows:
| In CHF'000 | 2008 | 2007 |
|---|---|---|
| Face value of convertible bond issued on October 5, 2005 | 350 000 | 350 000 |
| Transactions costs | -5 719 | -5 719 |
| Equity conversion component | -34 087 | -34 087 |
| Liability component on initial recognition on October 5, 2005 | 310 194 | 310 194 |
| Cumulative Interest expense as of January 1 | 13 242 | 7 838 |
| Interest expense for the year | 11 238 | 11 092 |
| Interest paid | -5 688 | -5 688 |
| Interest accrued (short term portion) | -1 343 | -1 343 |
| Liability component as of December 31 | 327 643 | 322 093 |
Transaction costs amounted to kCHF 6 337 of which kCHF 618 were allocated to the equity component of the convertible bond.
The above interest expense includes the following:
| In CHF'000 | 2008 | 2007 |
|---|---|---|
| Base interest (1.625%) | 5 688 | 5 688 |
| Allocation of the equity conversion component | 4 733 | 4 587 |
| Effective interest expense (effective yield rate of 3.2%) | 10 421 | 10 275 |
| Allocation of transaction costs | 817 | 817 |
| Interest expense | 11 238 | 11 092 |