Herbert Smith Freehills has advised Seven Group Holdings (SGH) on its A$350 million convertible bond issue, which has given SGH greater diversity in its funding base, increased average duration given its seven year term and supported the refinancing of a legacy debt platform acquired with Coates Hire. The bonds will be listed on SGX-ST in Singapore.
SGH is a leading Australian diversified operating and investment group with market leading businesses and investments in industrial services, oil and gas, and media.
While the convertible bond market has remained active offshore, this was the first significant deal of its type for three years by an Australian issuer. In issuing the convertible bond, SGH was able to leverage recent market volatility and the company’s strong performance.
This type of bond issue can be appealing to issuers because the option value in the conversion (even at a premium to current market price) results in a lower fixed cash coupon than would be payable on non-convertible debt. The bond is also typically bifurcated, in SGH’s case, with ~$300m reflected as debt and the balance reflected as equity, providing further balance sheet credit enhancements.
The Herbert Smith Freehills team was led by partners Rebecca Maslen-Stannage, Amy Geddes (London) and Patrick Lowden, with senior associate Malika Chandrasegaran, Mark Dickinson (London), Mia Harrison-Kelf, Alison Wong and Greta Ulbrick.
Rebecca Maslen-Stannage said “It was a pleasure to work with Seven Group Holdings on this transaction. Our multi-jurisdictional team worked closely with the Seven Group Holdings management team to execute the deal within the tight timeframes required for this type of transaction.”
Deutsche Bank acted as manager and underwriter and Bank of New York Mellon acted as trustee.