Sri Lanka’s Bogawantalawa Tea to raise Rs850mn through convertible debentures

ECONOMYNEXT – Sri Lanka’s Bogawantalawa Tea Estates (BTE) plans to raise 850 million rupees through 5 to 7 year listed BBB+ rated convertible debentures, issued at a 15 percent discount of 85 rupees.

The debentures, whose issue opens Thursday, 18th of July 2019, will have quarterly coupon payments, said Areva Investments which structured the instruments specially targeting the plantation sector.

It said in a statement the debenture listing would help the company to broaden their funding mix and to explore funding from diverse sources.

The discount on the investment value of the debenture extends a higher effective return to the investor, while the issuer will be comfortable to service the ballooned up repayments at maturity, if planned projects materialize by the end of 5, 6 and 7 years.

The debenture has a more plantation specific structure, which aims to mirror the cash flow patterns of a plantation sector company.

The debt includes call options on investors for a specific number of shares based on the number of debentures held, giving them the opportunity to be a part of the shareholding of the company, if its future profitability improves.

“BTE’s maiden listed debenture issue also marks the first non-finance sector debt listing, so far to grace the markets this year,” the statement said.

“In-line with the cash flow requirements of BTE, the debenture issue offers part convertible options to ordinary voting shares, at interim points before redemptions, where these options, also involving cash considerations, lies totally in the hands of the investor.”

A sinking fund, established for the total capital redemption of the issue, is mortgaged to the trustee, Hatton National Bank, to which 50 million rupees from the initial proceeds of the issue will be channeled.

The statement said a “cornerstone investor”, its parent Metrocorp, would take up a minimum of 50 percent and a maximum of 75 percent of the issue.





The proceeds of debentures would be used to start the Sinking Fund, settlement of high-cost debt, and on-going field development and factory development activities.

Areva Investment said the non-linear cash generation of plantation specific companies, require tailor-made, innovative, hybrid solutions, unlike the finance sector companies, who enjoy constant, linear cash flow patterns, which make them easy targets to offer varying funding fusions.

The domestic listed debenture market, comprising of 373 billion rupees of outstanding debentures, is heavy on finance sector debt, where 94.1 percent comprises of banks and finance company debentures, while a only a mere 5.9 percent comprises of non-finance sector debt. 
(COLOMBO, 17 July, 2019)


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