Efficient Capital Structures, a group that owns a 45% in Verizon Wireless, yesterday demanded that Vodafone separate its joint venture with Verizon Wireless and restructure its debt in the hopes of bringing Â£38 billion to shareholders. The proposal was chucked out the window on sight, but today it looks like Vodafone had to send the intern out to the parking lot to gather the mess back together. By law, Vodafone is required to pitch the proposal to shareholders, on the off chance that they think the new changes could make them more money than Vodafone’s original plans. The biggest complaint to the proposal is that issuing bonds to investors would limit the company’s ability to get involved in new ventures, pose significant risk and cut American progress short.
“ECS’ proposals would lead to Vodafone becoming a sub-investment grade borrower,” said Vodafone in a statement. “As such, Vodafone’s cost of debt would rise materially, contributing to incremental interest expense of at least GBP2 billion per annum. At this level of leverage, it is unlikely that Vodafone could benefit from tax deductibility on the full interest amount. Vodafone’s existing dividend policy would also be put at risk.”
A shareholder vote will be held July 24th.