Steinhoff issues convertible bonds to refinance debt

STEINHOFF International was raising as much as e400 million (R4.3 billion) in a sale of convertible bonds to refinance similar securities due next year, the furniture firm said yesterday.

The bonds, which would mature in 2017, would have a coupon of 5.625 percent to 6.375 percent and could be handed over for stock once the shares rose 30 percent to 35 percent from the current market price, Steinhoff said.

The proceeds would be used to buy back its R1.5bn of convertible bonds maturing in July next year, Steinhoff said.

“These need to be refinanced,” said Arup Ganguly, a partner at brokerage KNG Securities in London. “The company is offering to buy people out. Logically, they are taking care of the first obligation that’s coming due.”

Steinhoff bought French furniture retailer Conforama in March last year. The company is a frequent issuer in the equitylinked market, with four out of its five outstanding bond issues sold to convertible investors, data show.

The company said earlier this month that it was planning to cut its debt-to-equity ratio to 40 percent from 45 percent by June next year even as it was looking for acquisition opportunities in South America.

Steinhoff is selling an initial e300m of bonds and may increase that to e375m, according to the statement. The company has given sale managers BNP Paribas, Deutsche Bank and HSBC Holdings the option of buying as much as another e25m of the securities in a socalled over-allotment option.

The sale is being carried out through the firm’s Austriabased finance unit, Steinhoff Finance Holding. The parent firm, which is rated Ba1, will guarantee the issue.

The issuer has retained the right to call the bonds if the shares trade at 30 percent or more than the strike price for a set period.

Steinhoff stock fell 2.95 percent to R26.33 on the JSE yesterday. – Bloomberg