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Aquarius Platinum issues South Africa's first listed convertible bond

South Africa’s first listed convertible bond lists on the Main Board of the JSE Limited today (11th May), under the resources sector. The bond, issued by Aquarius Platinum, has been underwritten and managed by Rand Merchant Bank (RMB).

The Aquarius convertible bond issue is attractive to both the issuer and investors. Aquarius, the issuer, will be able to refinance its debt and recapitalise its balance sheet at a far cheaper rate than it would by raising finance from a bank or through a corporate bond issuance.

Aquarius will use the proceeds of the bond issue, together with capital raised from the rights issue and equity placement, to:

• settle existing funding obligations;
• re-open its Everest mining operation;
• fund the capital and operating costs of Ridge Mining plc should the proposed offer proceed; and
• maintain a robust balance sheet position to benefit from opportunities presented in the current market.

Investors in the three-year instrument have the ability to convert the bond into a fixed number of Aquarius shares (calculated on a 25% conversion premium to the base share price) at any time after a year after issuance of the bond.

“We believe that recent share price volatility, combined with relatively depressed equity markets, makes conversion rights very valuable,” says Justin Bothner of RMB Equity Capital Markets. “The convertible bond is a good opportunity to acquire equity exposure to Aquarius bearing in mind that, in another leg of the Aquarius recapitalisation, the equity placing of the company’s shares was significantly oversubscribed.”

“We believe that this relatively under-utilised asset class appeals to investors across the spectrum,” says Barry Martin of RMB Debt Capital Markets. “It also provides all the standard safety features of a debt security package as well as a twice-yearly interest payment on the bond based on the three-month Jibar rate plus 3%.”

If no conversion takes place, investors are repaid their capital outlay, plus any accrued interest, after three years.

A private placement of the bond raised R650-million. Each bond has a face value of R10 000, a base price of R30.51 and a conversion price of R38.13, fixing the number of shares underlying each bond at 262.

“The success of the private placing illustrates local buy-side demand for convertible bonds,” Bothner says. “South African corporates which previously had to go offshore to raise convertible bond funding can now do so within the country on the JSE.”

Martin adds: “Furthermore, we believe these hybrid instruments provide a viable funding solution for companies across the rating spectrum and higher-yield issuers could conceivably get the most value out of the convertible bond market at the moment.”

End.

To set up an interview with either of the spokespeople:

Contact

Joandra Griesel, Rand Merchant Bank on +27 11 282 1748

Spokespeople:

Contact

Justin Bothner, Rand Merchant Bank, Equity Capital Markets on +27 11 282 4150 or Barry Martin, Rand Merchant Bank, Debt Capital Markets on +27 11 282 8118