Interpublic Moves to Refinance Debt

To Sell up to $800 Million in Convertible Notes

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NEW YORK ( -- In an effort to avoid having to cash out $600 million in debt at year-end, Interpublic Group of Cos. is taking action to raise $700 million to $800 million to refinance debt and appease investors who fear the holding company faces a cash crunch.

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The company plans a convertible note issue that will raise an estimated $700 million and sales could go another $100 million. On Monday it initially set the target amount at $600 million but later raised that to $700 million or more because of what it said was investor demand.

Interpublic's management plans to use the proceeds to buy back a series of convertible notes that could have been put to the company for redemption in December. The company has offered to buy back the notes until April 4 in a tender offer worth an estimated $582.5 million.

'Junk' status
The put and the expiration of a $500 million credit line in May were among key reasons Interpublic's debt has been downgraded by several ratings agencies in recent months.

Standard & Poor's last week downgraded the company's debt to "junk" status, citing "operating performance challenges." Another firm, Fitch Ratings, downgraded a limited amount of Interpublic debt to junk status in December.

Credit ratings affect corporations' ability to secure credit for operations and lower ratings can increase financing costs.

Analysts were generally supportive of the refinancing, saying it will relieve the financing costs of Interpublic's $2.6 billion debt load. But they also warned the move could be risky because it could dilute earnings, causing a drop in earnings per share.

The refinancing "puts the company on more stable footing off of which it can effect an operations turnaround," said CIBC World Markets analyst David Doft, in a note issued today upgrading the stock.

Interpublic's stock gyrated through the day, from a low of $7.81 to a high of $8.14, as speculators bought and sold shares at record volume. Interpublic was the most active stock on the New York Stock Exchange, but closed unchanged at $8.01 per share.

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