RNS Number : 9699F
22 January 2010
Petropavlovsk plc - Convertible Bond
London, 22 January 2010
Petropavlovsk PLC launches approximately
USD300 million offering of Convertible Bonds due 2015
NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, JAPAN, AUSTRALIA OR IN ANY OTHER JURISDICTION IN WHICH OFFERS OR SALES WOULD BE PROHIBITED BY APPLICABLE LAW
Petropavlovsk PLC ("Petropavlovsk", the "Company", or, together with its subsidiaries, the "Group") announces today the launch of an offering (the "Offering") of approximately USD300 million of senior unsecured Convertible Bonds due 2015 (the "Bonds") to international institutional investors. The Bonds will be issued by the Company's wholly-owned indirect subsidiary Petropavlovsk 2010 Limited (the "Issuer") and will be guaranteed by the Company. The Bonds will be convertible into fully paid ordinary shares of Petropavlovsk (the "Shares") representing approximately 7% of the issued share capital of the Company. The announced size of USD300 million may be increased by up to USD50 million by way of an over-allotment option granted to J.P. Morgan Securities Ltd. allowing it to subscribe for up to an additional USD50 million of Bonds by 12 February 2010. The proceeds from the convertible bond issue will be used for general corporate purposes and to provide the Group with an attractive source of low cost long term capital.
The Bonds are expected to carry a coupon of 4% per annum payable semi-annually in arrear and the conversion price is expected to be set at a premium of between 30% and 35% to the volume weighted average price of the Shares between launch and pricing. The Bonds will be issued at 100% of their principal amount and, unless previously redeemed, converted or cancelled, will mature on the fifth anniversary of the issue of the Bonds in 2015. Conversion rights relating to shares underlying the Bonds representing greater than 5% of the current issued ordinary shares will only be physically settled if this is approved by shareholders of the Company at an extraordinary general meeting expected to be held on or around 10 February 2010. If the Company does not receive this approval, conversions will be partially cash-settled. The final terms of the Bonds are expected to be announced later today and closing, settlement and listing is expected on or about 18 February 2010. Investors have the option to have the Bonds redeemed at par for a certain period following a change of control of the Company. The Company will have the option to call the Bonds from approximately 2 years after the settlement date until maturity, in the event that the volume weighted average price of the Ordinary Shares exceeds 150% of the conversion price over a certain period. In addition, the Company has the right to redeem the Bonds if at any time the aggregate principal amount of the Bonds outstanding is equal to or less than 20% of the aggregate principal amount of the Bonds initially issued.
Application will be made for the Bonds to be admitted to listing on the Official List of the UK Listing Authority and admitted to trading on the Professional Securities Market of the London Stock Exchange.
Use of proceeds
The proceeds from the convertible bond issue will be used for general corporate purposes and to provide the Group with an attractive source of relatively low cost long term capital.
The proceeds will allow the Group to:
During 2009 the Group acquired Aricom and acquired the full USD180 million nominal of the gold exchangeable bonds previously issued by the Group. In November 2009 the Group also exercised a call in respect of the USD139.8 million outstanding of its previous convertible bonds, leading to conversion of the bonds into the Company's shares. Given the above mentioned corporate activity, including the repayment of its prior debt sources, the Group went from a net debt position of USD389 million at 31 December 2008 to a position of USD24 million at 31 December 2009 (unaudited). Cash and cash equivalents at the end of 2009 were USD76 million (unaudited).
The Group announced yesterday its capital expenditure guidance for 2010 of USD200 million in relation to its gold projects, excluding exploration. The Group's development programme is central to maintaining an increasing production profile.
In light of the recent corporate activity and the Group's significant development opportunities the Group has decided to increase its financial flexibility through the issue of the Bonds.
Rationale for issuing the Bonds
In light of recent acquisitions, corporate activity and development opportunities, the Group has investigated a range of funding options available to it and feels that the issue of the Bonds with a coupon of 4% and which would, assuming full conversion and no other share issues or adjustment events, convert into approximately 7% of the enlarged Company is an attractive and relatively low cost financing option as it:
allows the Group to take forward its strong business case
is an appropriate funding source for a mining company such as Petropavlovsk with its existing production facilities and exciting development projects
builds upon Petropavlovsk's reputation with convertible bond investors given the success of the 2005 issue.
The Group has a successful track record of using bond finance to unlock value in development stage assets and the issue of the Bonds, which will have a coupon of 4%, effectively replaces the previous bonds which had a coupon in excess of 7%. The Board believes that, notwithstanding the potential dilution resulting from the issue of the Bonds, the Offering is in the best interests of shareholders as it permits the Company to fund, on a relatively low cost basis, the next stage of the Group's development. The Directors believe that the near term development opportunities available require the Group to have funds available to take advantage of them and that the anticipated resultant growth in capital value should outweigh the effect of the potential dilution.
J.P. Morgan Cazenove is acting as Sole Bookrunner and Joint Lead Manager in connection with the Offering. Citigroup Global Markets is acting as Joint Lead Manager in connection with the Offering. Canaccord Adams, ING, Liberum Capital, Raiffeisen Centrobank, SG Corporate & Investment Banking and UniCredit Group are acting as Co-Lead Managers in connection with the Offering.
+44 (0) 20 7201 8900
+44 (0) 20 7726 8400
J.P. Morgan Cazenove
+44 (0) 20 7588 2828
THIS ANNOUNCEMENT IS DIRECTED EXCLUSIVELY AT MARKET PROFESSIONALS AND INSTITUTIONAL INVESTORS AND IS FOR INFORMATION PURPOSES ONLY AND IS NOT TO BE RELIED UPON IN SUBSTITUTION FOR THE EXERCISE OF INDEPENDENT JUDGEMENT.
IT IS NOT INTENDED AS INVESTMENT ADVICE AND UNDER NO CIRCUMSTANCES IS IT TO BE USED OR CONSIDERED AS AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY SECURITY.
ANY DECISION TO PURCHASE ANY OF THE SECURITIES SHOULD ONLY BE MADE ON THE BASIS OF AN INDEPENDENT REVIEW BY A PROSPECTIVE INVESTOR OF THE ISSUER'S AND THE COMPANY'S PUBLICLY AVAILABLE INFORMATION.
THIS ANNOUNCEMENT IS NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE US SECURITIES ACT OF 1933, AS AMENDED ("REGULATION S"). THIS ANNOUNCEMENT IS NOT AN OFFER TO SELL SECURITIES OR THE SOLICITATION OF ANY OFFER TO BUY SECURITIES IN THE UNITED STATES OR ANY OTHER JURISDICTION, NOR SHALL THERE BE ANY OFFER OF SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SALE WOULD BE UNLAWFUL. THE SECURITIES MENTIONED IN THE DOCUMENTATION HAVE NOT BEEN AND WILL NOT BE REGISTERED IN THE UNITED STATES UNDER THE UNITED STATES SECURITIES ACT OF 1933, (AS AMENDED) (THE "US SECURITIES ACT") OR UNDER THE SECURITIES LAWS OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, ABSENT REGISTRATION OR EXEMPTION FROM REGISTRATION UNDER THE US SECURITIES ACT. THE SECURITIES DESCRIBED HEREIN WILL BE PLACED AND SOLD ONLY OUTSIDE THE UNITED STATES IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S UNDER THE SECURITIES ACT. THERE WILL BE NO PUBLIC OFFER OF THE SECURITIES IN THE UNITED STATES OR IN ANY OTHER JURISDICTION.
THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
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IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA ("EEA") WHICH HAVE IMPLEMENTED THE PROSPECTUS DIRECTIVE, THIS ANNOUNCEMENT AND ANY OFFER IF MADE SUBSEQUENTLY IS DIRECTED ONLY AT PERSONS WHO ARE "QUALIFIED INVESTORS" WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE DIRECTIVE 2003/71/EC (THE "PROSPECTUS DIRECTIVE") ("QUALIFIED INVESTORS"). ANY PERSON IN THE EEA WHO ACQUIRES THE SECURITIES IN ANY OFFER (AN "INVESTOR") OR TO WHOM ANY OFFER OF SECURITIES MAY BE MADE IS MADE WILL BE DEEMED TO HAVE REPRESENTED, ACKNOWLEDGED, AND AGREED THAT IT IS A QUALIFIED INVESTOR WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE PROSPECTUS DIRECTIVE. ANY INVESTOR WILL ALSO BE DEEMED TO HAVE REPRESENTED AND AGREED THAT ANY SECURITIES ACQUIRED BY IT IN THE OFFER HAVE NOT BEEN ACQUIRED ON BEHALF OF PERSONS IN THE EEA OTHER THAN QUALIFIED INVESTORS OR PERSONS IN THE UK AND OTHER MEMBER STATES (WHERE EQUIVALENT LEGISLATION EXISTS) FOR WHOM THE INVESTOR HAS AUTHORITY TO MAKE DECISIONS ON A WHOLLY DISCRETIONARY BASIS, NOR HAVE THE SECURITIES BEEN ACQUIRED WITH A VIEW TO THEIR OFFER OR RESALE IN THE EEA TO PERSONS WHERE THIS WOULD RESULT IN A REQUIREMENT FOR PUBLICATION BY THE ISSUER, THE COMPANY OR THE MANAGERS OF A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS DIRECTIVE.
THIS ANNOUNCEMENT IS NOT A SUMMARY OF THE OFFERING AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OFFERING CIRCULAR TO BE PREPARED IN CONNECTION WITH THE OFFERING (THE "OFFERING CIRCULAR"). THIS ANNOUNCEMENT DOES NOT PURPORT TO IDENTIFY OR SUGGEST THE RISKS (DIRECT OR INDIRECT) WHICH MAY BE ASSOCIATED WITH AN INVESTMENT IN THE SECURITIES. EACH INVESTOR SHOULD READ THE OFFERING CIRCULAR FOR MORE COMPLETE INFORMATION REGARDING THE SECURITIES BEFORE MAKING AN INVESTMENT DECISION.
EACH MANAGER AND ITS AFFILIATES ARE ACTING ON BEHALF OF THE ISSUER AND THE COMPANY AND NO ONE ELSE IN CONNECTION WITH THE SECURITIES AND WILL NOT BE RESPONSIBLE TO ANY OTHER PERSON FOR PROVIDING THE PROTECTIONS AFFORDED TO CLIENTS OF THE MANAGERS, OR FOR PROVIDING ADVICE IN RELATION TO THE SECURITIES.
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IN CONNECTION WITH THE OFFERING, EACH MANAGER AND ITS AFFILIATES MAY, FOR THEIR OWN ACCOUNT, ENTER INTO ASSET SWAPS, CREDIT DERIVATIVES OR OTHER DERIVATIVE TRANSACTIONS RELATING TO THE SECURITIES AND/OR THE UNDERLYING ORDINARY SHARES AT THE SAME TIME AS THE OFFER AND SALE OF THE SECURITIES OR IN SECONDARY MARKET TRANSACTIONS. EACH MANAGER AND ITS RESPECTIVE AFFILIATES MAY FROM TIME TO TIME HOLD LONG OR SHORT POSITIONS IN OR BUY AND SELL SUCH SECURITIES OR DERIVATIVES OR THE UNDERLYING ORDINARY SHARES. NO DISCLOSURE WILL BE MADE OF ANY SUCH POSITIONS OTHER THAN AS REQUIRED BY APPLICABLE LAWS AND DIRECTIVES.
EACH MANAGER AND ITS SUBSIDIARIES AND AFFILIATES MAY PERFORM SERVICES FOR, OR SOLICIT BUSINESS FROM, THE ISSUER, THE COMPANY OR MEMBERS OF THE COMPANY'S GROUP, MAY MAKE MARKETS IN THE SECURITIES OF THE ISSUER, THE COMPANY OR MEMBERS OF THE ISSUER'S GROUP OR THE COMPANY'S GROUP AND/OR HAVE A POSITION OR EFFECT TRANSACTIONS IN SUCH SECURITIES.
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EACH PROSPECTIVE INVESTOR SHOULD PROCEED ON THE ASSUMPTION THAT IT MUST BEAR THE ECONOMIC RISK OF AN INVESTMENT IN THE SECURITIES FOR AN INDEFINITE PERIOD. NEITHER THE ISSUER, THE COMPANY NOR SOLE BOOKRUNNER MAKE ANY REPRESENTATION AS TO (I) THE SUITABILITY OF THE SECURITIES FOR ANY PARTICULAR INVESTOR, (II) THE APPROPRIATE ACCOUNTING TREATMENT AND POTENTIAL TAX CONSEQUENCES OF INVESTING IN THE SECURITIES OR (III) THE FUTURE PERFORMANCE OF THE SECURITIES EITHER IN ABSOLUTE TERMS OR RELATIVE TO COMPETING INVESTMENTS.
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