Administration May 11, 2002

Neuberger Berman Again Escapes Big Bond Buyback

November 5, 2002 (PLANSPONSOR.com) - For the second time this year, money manager Neuberger Berman avoided having to buy back much of a zero-coupon convertible bond issue maturing in 2021 by sweetening the deal.

Reported by

Fred Schneyer

A Reuters news report said the company only had to pick up a small share of the issue – some $25,000 of the bonds, leaving $166 million outstanding. Reuters said the company was faced with another major bond buyback in May of as much as $175 million; it ended up only having to pick up $8.7 million worth.

To avoid its own buyback, Neuberger last week offered to pay bondholders semi-annual cash payments, at a rate of 3.047% a year over the next 18 months, for their agreement not to exercise their right to sell the bonds back on Monday, Reuters said.

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In May, Neuberger had offered bondholders both a one-time $4.34 cash payment for every $1,000 in face value, plus the option to sell the bonds back to Neuberger on November 4, Reuters said.

Holders of Neuberger’s convertible bonds still have a right to sell them back to the company on May 4 of 2004, 2006, 2011 and 2016.

Some financial services companies have been successful in avoiding a buyback, and others not. In May, Stilwell Financial Inc. the parent of Janus mutual funds, was forced to spend $614.5 million and draw down part of a bank credit line to buy back its own convertible bonds.