TerraCom Limited (ASX: TER) today launched an A$63 million restructuring program in order to bring down its cost of debt and obtain significant leverage in the final negotiation of refinancing existing debt.
The company announced a pro-rata non-renounceable entitlement offer at $0.58 per share to raise approximately A$35 million at an exchange ratio of 3 new shares for every 20 shares as on the record date of 15 May 2019.
As per the report, the entitlement offer is fully underwritten by Petra Capital Pty Ltd who is also acting as a lead manager and bookrunner to the Entitlement Offer. It is further sub-underwritten by existing shareholders Bonython Coal No 1 Pty Ltd, Noble Resources International Pte. Ltd and, as well as Mistlake Pty Ltd.
TerraCom has also entered into a US$20 million convertible bond with shareholder, OCP Asia at an exercise price of A$0.696, a term of 3 years and a coupon of 9.95% per annum. Further, the company is currently in advanced negotiations in relation to the refinancing of its Euroclear Listed Bond for a principal amount of US$100 million and interest cost of LIBOR plus margin of 350-450 bps payable quarterly.
Following the completion of the Entitlement Offer and upon the conversion of the Convertible Bond, the cash interest costs of the company will reduce by approximately A$8 million per annum. On the same hand, the completion of the refinancing of the company’s Euroclear listed bond could bring down the cash interest costs by further A$8 million per annum, taking a total cash interest costs saving to ~A$16 million per annum.
Wal King, Chairman of TER, stated that the fund raised would be utilized to reduce debt and provide expected condition precedent funding in order to finalise the Company’s refinancing of its balance sheet. He added this would also allow the Board to deliver on its short term goal of paying first dividend to shareholders.
In the investors' presentation released today, TerraCom shared its vision to become a mid-tier coal producer. The company, therefore, focuses on near term brownfield and greenfield expansion opportunities while opportunistically reviewing the sector to achieve growth through value accretive production.
On the financial front, the company has achieved Group EBITDA of $52.6 million for the first half of Fiscal 2019 with net operating cash flows of $50.7 million, excluding interest.
Outlook- For the entire Fiscal Year 2019, the company forecasts operating EBITDA to be $114 million. Forecasted coal sales for the June 2019 Quarter stands at 682,000 tonnes with 2.7Mtpa annualised run rate.
TER stock price last traded at $0.575, up 3.604%, after lifting of voluntary suspension on 10 May 2019. Over the past 12 months, the stock has jumped up by 136.17%, offsetting a dip of 5.93% recorded in the past three months.
The Entitlement Offer, stated above, is scheduled to open on 20 May 2019 and will close on 29 May 2019.
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