Barminco repurchases US high yield bonds
Barminco is pleased to announce it has successfully repurchased $US36.9 million, or 8 per cent, of its US High Yield Bonds.
The repurchase will deliver an annual saving in cash interest expense to Barminco of $A2.5 million.
The repurchase was fully funded through utilising a favourable AUD-USD exchange rate movement since the original issuance of the bonds in May 2013 and did not use existing cash reserves.
In May 2013, Barminco raised $US485 million in US High Yield Bonds to replace a legacy debt structure. At that time the Company established a cross-currency swap to fix both the principal and interest amounts, at an exchange rate of $0.994. Given the material devaluation in the AUD since that date, Barminco sought the opportunity to liberate part of the value held in the difference between the exchange rate in the swap and the current market rate.
Essentially, Barminco released a portion of the value in the swap and used the proceeds to repurchase bonds. The Company simultaneously entered into a new swap, meaning the value of the bonds to be paid at maturity in AUD remains unchanged.
The repurchase was completed via a cash tender offer, which closed in New York on Friday night. Barminco understands it is the first time an Australian company has executed a buy back of US High Yield Bonds.
Under the offer existing bondholders were invited to sell their bonds back to the Company via a “Dutch Auction”, where bondholders submitted tenders within a price range specified by the company.
The final purchase price of the bonds, which have a face value of $US1 each, was $US0.925 – reflecting a slight premium of the last traded value of $US0.895.
Barminco had set a maximum of up to $US65 million of bonds to be repaid, with no minimum.
Barminco Chief Financial Officer Peter Bryant said: “We are pleased we have been able to repurchase some of our bonds to reduce ongoing cash interest expenses, which will flow straight through to the bottom line.
“While we are delighted some bondholders saw value in cashing out their bonds, it is equally encouraging that a number of our bondholders were reluctant to tender their debt.
“That shows their confidence in Barminco’s future.
“Feedback from our advisers in New York is that many of our bondholders believe the business is in a good place and they are not interested in reducing their exposure.”
Barminco’s continues to have significant liquidity, with cash holding of $A116 million, a $A50 million Revolving Credit Facility (which is effectively undrawn), and undrawn equipment finance facilities of $A40 million, as at 30 September 2014.