Riverdeep, the Dublin-based technology firm, will raise €225 million in a bond issue this month, about 10 per cent more than it originally intended.
The company, which develops e-learning software and courseware for schools, said yesterday it would add the extra cash to its balance sheet and use it for general corporate purposes.
The larger-than-expected bond issue caused Standard & Poor's credit rating agency to revise its outlook for Riverdeep to negative from stable. It cited the volatile nature of spending in the US school sector and future debt repayments for the downgrade.
"Although there are no immediate plans for Riverdeep to spend the additional debt issue proceeds, Standard & Poor's believes that an increase in the gross debt burden has resulted in a higher refinancing risk to bondholders over the medium term," said Ms Anna Overton of Standard & Poor's.
The corporate bond, which is due on April 15th, 2011, was priced at par to yield 9.25 per cent - the same yield as outlined in Riverdeep's offer memorandum.
The bond, which was initially expected to total €205 million, is part of a debt restructuring plan by Riverdeep. The company has already indicated that this restructuring will involve raising a further $75 million (€60.5 million) through a senior loan.
"The firm went out and marketed the bond, which was significantly oversubscribed, so we decided to upsize it by 10 per cent and put the extra cash on the balance sheet," said a Riverdeep spokeswoman.
Last year Riverdeep was bought out by its management in a deal valuing the company at $376 million. Hertal Acquisitions, a consortium led by Riverdeep chief executive Mr Barry O'Callaghan, now owns the company.
At the time of the management buyout (MBO), Riverdeep shareholders were offered $1.51 per share. In a note issued last week, Davy Stockbrokers placed a $3.40 valuation on each Riverdeep share.
Riverdeep's debt restructuring will see venture capital funds Alchemy Partners and MSD Private Equity, which backed last year's MBO, double their investment when they are bought out.
Riverdeep's two biggest shareholders, Mr Pat McDonagh and Mr O'Callaghan, are exercising an option to buy Alchemy and MSD's 32.9 per cent stake in Riverdeep, at a price of $2.34 per share.
Credit Suisse First Boston led the bond issue deal, with Royal Bank of Scotland and Davy Stockbrokers as co-leads.
