BlueScope will raise USD500m in new 5 year unsecured bonds. Part of the proceeds will be used to partially call principal on the existing 2018 bond
BlueScope has announced that it is raising a new USD500m unsecured bond (link to announcement here).
The bond has a 6.5% coupon and a first call in two years’ time at USD103.25.
With strong demand from investors, BlueScope was able to increase the issue size from USD300m to USD500m. BlueScope intend to use the proceeds of the bond to repay outstanding amounts under its USD300m unsecured bridge facility, and to partly redeem its existing 2018 unsecured bonds. BlueScope issued USD300m of the existing 2018 bond and will look to partly redeem about USD190m of principal with the proceeds of the new issue.
Since issuance, the yield on the new BlueScope bond has already tightened by around 50 basis points, reflecting the strong demand for this credit.
Settlement of the new bond is expected to occur on 12 May and a partial redemption notice for the existing 2018 bond is expected to be delivered following settlement. The 2018 BlueScope bonds are callable at any time with a minimum 30 days’ notice. The current call price on the 2018 bond is USD103.563. We will provide further details to bondholders once the redemption notice is provided by the company.
We note that the partial call represents around 63% of the 2018 bond principal outstanding (USD190m out of USD300m). In the bond information memorandum, the company notes the following around partial redemptions:
If we are redeeming less than all the Notes at any time, the Trustee will select Notes on a pro rata basis to the extent practicable, subject to the rules and regulations of the applicable clearing system. We will redeem Notes of US$2,000 or less in whole and not in part.
If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount thereof to be redeemed. We will issue a new Note in a principal amount equal to the unredeemed portion of the original Note in the name of the holder upon cancelation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption.
As a result of the announcement, the capital price of the existing 2018 BlueScope bond has rallied closer towards the call price level. For investors looking to take profit on their existing BlueScope position now, the bonds can be sold currently at a capital price of around USD102. Alternatively, investors can wait for the partial redemption notice (noting the current call price of USD103.563).
We will look to make the new BlueScope bond available as a DirectBond shortly.
Please contact your FIIG representative for further details on the BlueScope bonds. Available to wholesale investors only.