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Property for Industry to diversify funding base with $100M bond offer

Monday 17th September 2018

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Property for Industry wants to diversify its funding base with the sale of up to $100 million of bonds.

The $75 million seven-year bond offer opens today and will take up to $25 million in oversubscriptions. The senior secured fixed-rate notes have an indicative issue margin range of 1.6 percent to 1.7 percent per annum, subject to a minimum interest rate of 4.15 percent. The seven-year swap rate was recently at 2.56 percent, implying the notes will pay annual interest of 4.16 percent to 4.26 percent.

"The proceeds of the offer are expected to be used to repay existing bank debt of the PFI group and result in PFI having a more diversified funding base with a longer debt maturity profile," PFI said. 

The industrial property investor will use the proceeds to repay some of its $389 million of bank debt. PFI's $475 million facility attracts an average annual interest cost of 4.9 percent. 

Companies have turned to the NZX debt market as low interest rates make for an attractive funding option and in August PFI said while it had made no changes to its bank facilities during the first half of 2018 it was "considering options," including a second senior secured bond issue to extend and diversify borrowings. It has a gearing of 31.4 percent.

The bond will extend the company's weighted average term to expire for its debt to 3.9 years from 3.2 years. 

The margin and interest rate will be set in a bookbuild on Sept. 21, it said. The bonds are expected to be issued Oct. 1. 

There is no public pool for the offer, with all bonds reserved for clients of the joint lead managers, NZX participants and other approved financial intermediaries.

The stock last traded at $1.80 and is up 7 percent so far this year. PFI's $100 million 2024 bond paying a coupon of 4.59 percent last traded at a yield of 4 percent. 

(BusinessDesk)

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