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| Essar to issue $500-million FCCBs to finance acquisitions |
| S Kalyana Ramanathan / London Jan 19, 2011, 01:23 IST |
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Essar Energy today announced the launch of an offering of approximately $500 million of convertible bonds, due 2016.
In a statement issued today, it said it intends to use the proceeds primarily to pursue acquisition opportunities of power, coal and oil and gas assets, in line with its recently stated strategy.
Last week, the company had said its subsidiary, Essar Oil, was "re-engaged" in discussions to buy Royal Dutch Shell Plc's Stanlow refinery in the UK, without putting a timeline for conclusion of the deal.
The refinery at Stanlow, Britain's second-largest, can process 233,000 barrels a day. Earlier reports have valued the three units there at £1-1.5 billion ($2.48 billion).
Essar was in talks with Shell for buying these oil assets in 2009, though it did not fructify into a deal. In May 2010, it managed to raise $1.3 billion through its initial public offer on the London Stock Exchange and went to become an FTSE-100 stock within days of listing. The company's management during its roadshows to sell the IPO had said acquisitions were very much on the anvil.
The company today also said the proceeds from the convertible bonds it proposed to issue may also be used for “general corporate purposes, including to provide financial flexibility for the announced power and oil and gas projects and to refinance existing debt”.
The bonds are expected to have a coupon of 3.75-4.25 per cent, payable semi-annually in arrears and will be convertible into fully paid ordinary shares of the company. The conversion price is expected to be set at a premium of 30-35 per cent to the volume-weighted average price of the ordinary shares on the London Stock Exchange between launch and pricing.
The announced issue size of $500 million may be increased by up to $100 mn by way of an increase option prior to pricing and by up to $75 mn by way of an over-allotment option granted to the joint book-runners of the offering, allowing them to subscribe for up to an additional $75 mn of bonds by January 28.
Based on the announced issue size of $500 mn, the bonds to be issued are expected to represent approximately 43 mn ordinary shares or 3.3 per cent of the current total number of issued and ordinary outstanding shares of the company.
Deutsche Bank AG, London branch, JPMorgan Securities and Standard Chartered Bank have been appointed joint book-runners for the offering.
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