Turners may sell $30M of 2-year convertible bonds as existing issue nears maturity

Friday 12th August 2016

Turners Group, the financial services firm that has $23 million of convertible bonds set to convert to shares on Sept. 30, said it is contemplating a new offer of up to $30 million of the securities to ensure it has funds available in the event it identifies acquisition opportunities.

The offer would be for $25 million of two-year convertible bonds with the ability to accept oversubscriptions of up to $5 million, the Auckland-based company said in a statement. The bonds would pay annual interest of 6.5 percent.

The existing bonds, issued in 2014, pay interest of 9 percent but interest rates have tumbled since then, with the two-year swap rate having shed about 200 basis points. At the same time, Turners stock has gained 20 percent to trade recently at $3.12.

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.

Turners intends to allow holders of the existing bonds to use their redemption proceeds from those bonds to subscribe for new bonds, though chairman Grant Baker said he would expect "a reasonably high conversion rate" to shares, so the new issue would likely raise more capital.

The company had no specific targets at the moment "but we're generally keen on making more acquisitions and we want to be in a position to act," he said.

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.

In July, Turners 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.

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. Since then, it has been on a buying spree, adding Levin-based lender Oxford Finance, Greenwich Life Insurance and Christchurch-based Southern Finance.

BusinessDesk.co.nz

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