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Turners says 75% of convertible bond holders elect to convert to shares

Friday 2nd September 2016

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Turners, the financial services firm, says 137 holders of its convertible bonds have elected to take shares when they come due on Sept. 30, amounting to 75 percent or the debt on issue, or $17.4 million.

Chairman Grant Baker said the conversion rate was higher than expected and "reflects the market’s confidence in the group’s strategy and continued growth.”

Last month, the company announced a new offer of up to $30 million of convertible bonds, subject to approval by shareholders at their annual meeting on Sept. 14.

Approval is needed under NZX listing rules covering related parties because the biggest shareholders in Turners, Hugh Green Investments with 22 percent, the Business Bakery (13 percent), Harrigens Trustees (7.6 percent) and Bartel Holdings (6.9 percent) plan to participate in the bond issue and would increase their shareholdings when they converted. Those four shareholders own 49.8 percent of the existing bonds that mature this month and would be entitled to up to 46 percent of the new issue under the maximum allocation priority for existing bondholders.

Proceeds of the new issue will be used to finance the redemption of the existing bonds that aren't converted, which will amount to about $5.6 million, while the balance would be held for potential acquisition opportunities. The new bonds mature on Sept. 30, 2018, and pay annual interest of 6.5 percent, while the maturing two-year bonds paid 9 percent.

The new bonds would be on the same terms except the conversion rate would be the lesser of $3.75 or a 5 percent discount to the average daily volume-weighted price of the shares in the 90 days prior to the maturity date. For the existing bonds, the rate was $3.

An evaluation of the new offer by consultancy Campbell MacPherson concludes the 6.5 percent interest rates on the new bonds is fair to non-associated shareholders. It values the $1 face value new bonds in a range of $1.03 to $1.10, including the 'option' value of the conversion terms, and says the rationale for the new issue is "sound".

Chief executive Todd Hunter said the company was very pleased with the level of conversion of the existing bonds to shares, which wouldn't alter the plans for the new issue of up to $30 million .

Turners shares last traded at $3.05 and have gained about 13 percent in the past 12 months.

Turners became the name for the group after Dorchester Pacific acquired Turners Auctions in 2014 to complement its largely automotive loan book and insurance business. It survived the collapse of many finance companies in the wake of the global financial crisis. 

Last week the company acquired a one-hectare industrial site on the corner of Roscommon Road and Vogler Drive in Wiri, South Auckland, for $4.8 million, which it said would allow for expansion of its truck and machinery business and in July it bought Auckland used car importer and dealer network Buy Right Cars for $15.3 million, adding eight dealer sites across Auckland and a workshop in Manukau.

Previous acquisitions included Levin-based lender Oxford Finance, Greenwich Life Insurance and Christchurch-based Southern Finance.

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