Lion goes for entire Rs. 2 b in debenture issue; offer draws Rs. 2.6 b demand
Monday, 8 December 2014 00:00
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Lion Brewery (Ceylon) Plc is exercising the option on the recently-oversubscribed debenture issue worth Rs. 2 billion.
The offer was 10 million rated, unsecured, redeemable debentures of Rs. 100 each with an option to increase it by a further 10 million debentures. Rated “AA-” by Fitch Ratings debentures offered a fixed rate offering 7.85% interest rate per annum payable semi annually whilst the annual effective rate is 8% per annum.
The issue drew 22 applications requesting for Rs. 2.6 billion worth of debentures.
Payment made by cheques and RTGS amounted 19 worth Rs. 1.3 billion whilst there were three applications worth Rs. 1.3 billion with payment made by bank guarantees.
The basis of allotment would be 60% of the issue (i.e. 12 million debentures) to indentified institutional investors and to investors identified on a non-preferential basis 100% of debentures applied up to and inclusive of 100,000 debentures and those above 100,000 debentures the minimum allotment will be 100,000 debentures plus 54.6895% of the balance amount applied rounded to the nearest 100 debentures.
Financial advisors and managers to the issue was NDB Investment Bank.
During the financial year 2012/13, LION commenced a capital expenditure program to modernize and upgrade its existing production facilities. The ongoing program will enable LION to introduce latest technology and developments in the brewing techniques, which will improve productivity whilst increasing capacity.
The total cost of the capital expansion project is estimated at approximately Rs. 8 billion.
To finance the cost of the project, LION obtained short-term loan facilities amounting to Rs. 4 billion and raised Rs. 3 billion via a similar listed rated unsecured redeemable debenture issue in June 2013 with the intention of financing the remainder through internally-generated funds.
In order to benefit from the prevailing low interest rate environment, LION intends to utilise the Rs. 2 billion funds raised through this Debenture Issue to refinance part of the said short-term loan facilities. This will enable LION to reorganise the balance sheet of the company and thereby have a better mix of long-term and short-term borrowings. The short-term loan facilities LION has obtained have interest rates which are renewable on a monthly basis.
LION expects to refinance the short-term loan facilities which will have the highest interest rates at the time LION obtains the funds raised through this Debenture Issue.
With regard to the project, LION has incurred to date a total cost of approximately Rs. 5 billion and the remaining cost of approximately Rs. 5 billion is to be incurred to complete the modernisation of the production facilities together with the infrastructure and other ancillary support services. LION expects the entire project to be successfully completed within the current financial year.
