BSkyB raising $600 million in bonds to boost war chest

UK's leading pay TV broadcaster British Sky Broadcasting (BSkyB) plans to raise £400 million ($600 million) through a private placement of bonds to institutional investors to create a war chest for future acquisitions and refinancing of its existing debt.

Rupert Murdoch's News Corporation, which is the largest shareholder in BSkyB, said it will pay 9.5 per cent interest on the 10-year bond notes maturing in November 2018, to be issued to institutional investors.

Funds from the bond issue will be used for "general corporate purposes", but they could also be used to refinance existing debt as well as future acquisitions and the bond placing is expected to be completed by 24 November.

"In addition, the company may use the proceeds for the refinancing of existing debt and for acquisitions of business and/or assets in support of its strategy," the company said in a statement.

Last month, BSkyB posted a 21 per cent rise in third quarter operating profit due to a large increase in new customers and it has not been hurt by the global economic meltdown as only about 5 per cent of its revenue comes from advertising.

It was reported in the media that BSkyB is in talks with Carphone Warehouse for its telecom arm `Talk Talk' in order to boost its broadband subscriber base.

Charles Dunstone, the founder of Carphone Warehouse, indicated that the company was probably thinking of splitting its TalkTalk broadband and telecom business from its other activities.

BSkyB is also understood to be holding talks with Italian broadband operator Tiscali for sale of its UK broadband operation at a reported price of £450 million after Carphone Warehouse dropped out of the auction.

It recently announced that it will launch an online version of its pay TV service in the UK.

BSkyB has to make provision to repay £800 million in bonds which are maturing between February and July next year, including $600 million in February and $650 million in July.