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St Laurence Property and Finance hopes support from its existing investors will help it to raise $24.4 million despite strong market volatility which has seen other groups pull out of capital raisings over the past six months.
The investment fund, which is managed by St Laurence and is
27.7 per cent owned by them, announced the issue yesterday with plans to list its new and existing mandatory convertible property notes on the New Zealand stock exchange.
Under the offer holders of existing notes will be entitled to subscribe for one new property note for every four held from 5pm on February 26.
The 32.5 million new notes will be issued at 75c per note and have a fixed coupon of 9 per cent per annum on the principal amount of $1 each for the eight-month period from issue until conversion to ordinary shares on December 1.
It's not the first time the company has issued rights to raise money for its developments but it could be a big ask for investors under current market conditions.
Last year Yellow Pages pulled a $150 million bond issue due to lack of interest. ING and AMP also delayed initial public offers for retirement village floats, although triple A rated Raboplus successfully raised $900 million.
Market sources have questioned whether the 9 per cent coupon will be enough to tempt investors, given the high interest rates available at the bank and the higher risk associated with property development.
But St Laurence general manager funding and corporate services Helen Mexted said its offer was different from others in that it was going out to existing investors and was looking to raise the money for a specific purpose.
Despite the challenging market she said the company believed the timing was right in terms of its development opportunities to go out to investors. "We are going out to existing investors as opposed to new investors and have previously had very good investment support from that. We are also raising the money for a very specific purpose - that's something we will be making very clear to brokers in our communication."
Mexted said the discount on the issue price also meant that the return on investment was effectively 12 per cent per annum for the first eight months.
The money raised would be used to fund five different development opportunities, several of which already had resource consent.
It will also be used to pay out $8.4 million in debentures which are due to mature by April 30.
The offer opens on March 5 and closes on April 10. Sole shareholder St Laurence plans to take up its full entitlement of 9 million new notes for $6.75 million.
