Mining contractor Barminco Holdings has taken advantage of the falling Australian dollar to repurchase $US36.9 million of its US high-yield bonds, through a transaction that did not require the use of cash reserves.
It had been looking to buy back up to $US65 million through a ‘dutch auction’ but found that many investors preferred to hold onto the bonds.
The price paid was US92.5 cents in the dollar, a premium to the last traded value of US89.5 cents.
When it launched the tender offer early this month, Barminco said it would pay a price between US87.5 cents and US92.5 cents in the dollar.
Barminco said the repurchase would deliver annual savings in interest expense of $A2.5 million.
The contractor raised $US485 million through the issue of the high-yield bonds in May 2013, using the proceeds to refinance existing debt.
At that time, the company established a cross-currency swap to fix both the principal and interest amounts, at an exchange rate of US99.4 cents.
The declining value of the Aussie dollar since then created an unrealised profit, which Barminco has crystallised in order to fund the repurchase bonds.
The company simultaneously entered into a new swap, meaning the value of the bonds to be paid at maturity in $A terms remained unchanged.
Barminco chief financial officer Peter Bryant said the company was pleased to be able to reduce its ongoing cash interest expense.
“While we are delighted some bondholders saw value in cashing out their bonds, it is equally encouraging that a number of our bondholders were reluctant to tender their debt,” he said.
“That shows their confidence in Barminco’s future.
“Feedback from our advisers in New York is that many of our bondholders believe the business is in a good place and they are not interested in reducing their exposure.”
Barminco said it continues to have significant liquidity, with cash holdings of $A116 million, a $A50 million Revolving Credit Facility (which is effectively undrawn), and undrawn equipment finance facilities of $A40 million, as at September 30 2014.
