Vodafone Group Plc issued a notice of redemption on Tuesday for its 4.375% notes that mature in May 2028. The telecommunications company said it will retire these dollar-denominated notes by paying holders a redemption amount determined by one of two methods, with the final payout equal to the larger of the two calculations.
Redemption payment calculations
The first method is straightforward: Vodafone will pay 100% of the principal amount of the notes, together with any accrued and unpaid interest up to the redemption date.
The second method requires a discounting calculation. Under this option, Vodafone will compute the sum of the present values of the remaining scheduled principal and interest payments on the notes. Those future cash flows will be discounted to the redemption date on a semi-annual basis using an adjusted treasury rate plus 25 basis points, and the company will also include accrued and unpaid interest to the redemption date in the final amount.
Definitions and calculation mechanics
The notice refers to an adjusted treasury rate as defined in the prospectus supplement dated May 23, 2018, that relates to these notes. In carrying out the discounting calculation, Vodafone will assume a 360-day year composed of twelve 30-day months for interest and present-value calculations.
The company did not provide additional commentary in the notice about timing beyond issuing the redemption notice on Tuesday, nor did it change any terms of the notes beyond specifying the formulae used to determine the redemption price.
Implications
The notice sets out the contractual procedures Vodafone will use to determine the payout to noteholders at redemption, tying the discounted calculation to the adjusted treasury rate described in the prospectus supplement and using a standard 360/30-day convention for the discounting exercise.