Eppley Issues Preference Shares to Refinance Debt

• Eppley Limited recently published its prospectus inviting investors to subscribe to three classes of preference shares valued at J$1.20Bn in total. The company has invited investors to purchase 15Mn Class A shares with a dividend yield of 5.00% that mature in 2023; 25Mn Class B shares with a dividend yield of 7.25% that mature in 2026; and 20Mn Class C shares with a dividend yield of 7.75% that mature in 2028.  All three classes of shares are priced at J$20 per share. 
• The proceeds will be used to refinance existing debt, specifically the following issues: US$1.50Mn note due August 2021 (4.75% pa), J$361.60Mn preference shares due December 2021 (8.25% pa), J$335Mn note due July 2022 (8.00% pa) and J$250Mn preference shares due December 2023 (8.75% pa). A portion of the proceeds will also be used to pay the expenses of the invitation, which the directors believe will not exceed $35Mn. 
• The success of this raise will help to strengthen the company’s financial position and contribute to cost savings since it will result in a reduction in the average interest cost of the existing debt issues. In addition to this, the newly issued preference shares are all denominated in $J dollars, which means that it will remove the foreign exchange risk on the USD debt. 
• Eppley currently has four preference shares listed on the stock market, which include: EPPLEY 7.50% (J$7.00), EPPLEY 8.25% (J$6.00), EPPLEY 6.00% (US$1.01) and EPPLEY 8.75% (J$7.52).  The EPPLEY 7.50% and 8.25% issues have appreciated by 57.0% and 18.3% respectively, since the start of the year, while the EPPLEY 6.00% has remained flat at US$1.01. The EPPLEY 8.75% on the other hand has declined by 3.2% year to date.

(Source: Eppley Prospectus & NCBCM Research)