Nikko Cordial Corp., the holding firm of Nikko group brokerages, said Monday it will pay 73.4 billion yen to buy back convertible bonds it sold in 1998 to Citigroup Inc., its biggest shareholder.
The convertible bonds have a face value of 47.6 billion yen, Nikko Cordial said.
Nikko Cordial and Citigroup formed a comprehensive tieup in June 1998. Nikko issued 154 million common shares and 150.1 billion yen worth of convertible bonds for purchase by the major U.S. financial services firm.
In March 2000, Citigroup converted 102.5 billion yen of the convertible bonds into shares, bringing its equity stake in the Japanese holding firm to more than 20 percent. At that time, the two firms agreed that Citigroup would gradually sell the remaining convertible bonds.
Nikko Cordial believes now is a good time to buy the bonds back as its profitability has recovered to give the firm sufficient cash flow, company officials said.
The buyback will also prevent the company's stock value from being diluted, as Citigroup had planned to sell the converted shares on the market, which would increase the number of Nikko Cordial's outstanding shares and thus lower the company's per-share profit, the officials said.