Johannesburg - Aveng, South Africa’s second-biggest construction company, sold 2 billion rand of convertible bonds as the builder seeks to repay debt and raise cash for future growth.
The unsecured five-year securities will pay a coupon of 7.25 percent twice a year, the Johannesburg-based company said in a statement today.
The conversion price was set at 28.76 rand a share, a 30 percent premium to today’s average trading levels.
South African construction companies are seeking to expand on the continent as the domestic economy slows.
Aveng has a revolving outstanding debt facility of 1 billion rand, maturing in 2016, according to data compiled by Bloomberg.
“Aveng intends to use the net proceeds from the offering to repay certain existing debt facilities, extend its debt maturity profile,” the company said.
“The offering forms part of the company’s strategy to manage its liquidity needs, diversify its funding sources and reduce its reliance on bank debt, and to position itself to take advantage of growth opportunities.”
Aveng shares fell 6.1 percent, the most since August 5, to 22 rand and extending its three-day decline to 9 percent.
The stock has weakened 17 percent this year, compared with a 12 percent decrease for larger competitor Murray & Roberts.
Coincidental Timing
Barclays and JPMorgan Chase were joint bookrunners for the bond sale, Aveng said.
Nedbank Capital, a unit of Johannesburg-based Nedbank, is acting as co-manager.
The bonds will probably be settled about July 23, according to the company.
The announcement comes a day before the South African Reserve Bank’s Monetary Policy Committee announces a decision on interest rates.
Economists are divided on whether there will be an increase or no change.
“The timing of this announcement and that of an MPC meeting that may or may not result in a change of interest rates is totally coincidental,” the company said. - Bloomberg News