Sunpower Group’s announcement of a S$99.6M convertible bond rights issue is a corporate action designed to raise funds by issuing convertible bonds to its existing shareholders. Here’s how it works and what it means for investors:
Key Details of the Convertible Bond Rights Issue
1. Conversion Price
The initial conversion price for the convertible bonds is S$0.50 per share, subject to adjustments in accordance with the terms and conditions.
2. Tenor of the Bond
The bonds will mature on the fifth anniversary from the issue date, meaning they will mature in 2022 if issued in 2017.
3. Coupon Rate
The bonds will bear an annual interest rate (coupon) of 2.5% per annum on the principal amount until maturity.
4. Conversion Terms
Bondholders may convert the bonds into shares at the conversion price during the conversion period.
Adjustments to the conversion price may occur if the company fails to meet performance targets or due to specific corporate actions (e.g., rights issues, bonuses, or stock splits).
5. Redemption
If performance targets are not met or in the event of specific predefined conditions like a “Relevant Event,” bondholders can demand redemption at a price that provides a total internal rate of return (IRR) of 8% per annum.
Redemption is also possible at maturity if the bonds are not converted.
6. Tradability
The bonds can be traded or transferred to other parties.
Shareholders have the option to sell their rights to subscribe to the bonds on the open market (if the rights are tradeable).
7. Use of Proceeds
The net proceeds of approximately US$106 million will be used for:
Green investment projects, such as cogeneration power facilities and environmental protection initiatives.
Examples include the Shantou Project (US$19.2 million) and Liutuan Project (US$10.6 million).
Monitor Announcements:
Sunpower Group will release supplementary notices with exact timelines post-SGM.
Rights Disposal:
If rights can be sold on the stock exchange (if tradeable).
Investors who choose not to subscribe can monetize the rights by selling them during the trading window.
Bond Disposal:
Once issued, the convertible bonds can be sold in the bond market to other investors.
Bonds can also be held until maturity or converted into shares, depending on the investor’s strategy.
The decision to subscribe depends on:
If the company’s projects are successful, bondholders stand to gain both from the fixed interest income and potential equity upside on conversion.
Risk Appetite: Investors must weigh the company’s financial stability, potential share dilution, and performance risk.
The bond issue’s attractiveness may be influenced by the conversion premium relative to the current share price and the bond’s tradability.
Thank you
