TFS Corporation Issues US$250M of New Notes
The new notes will mature in August 2023 and will bear interest at a rate of 8.75% per annum.
The owner of the world’s largest sandalwood plantations TFS Corporation (ASX:TFC) announced the issuance of new senior secured notes to raise total proceeds of US$250m.
The new notes will mature in August 2023 and will bear interest at a rate of 8.75% per annum. The proceeds will primarily be used to redeem TFS’s existing Notes of US$200m, while surplus net proceeds around A$50m will be available for general corporate purposes. The issuance of the new notes extends the maturity and significantly reduces the cost of TFS’s debt.
Settlement is expected to occur on 27 July 2016 in New York, subject to certain conditions.
Issuance of New Notes Will Reduce Cost of Debt
The cost of the company’s debt will be reduced from 11% to 8.75% per annum. The maturity of the debt will be extended by five years to August 2023.
TFS Managing Director Frank Wilson believes that the company’s financial position will be strengthened: “TFS’s financial position is further strengthened by this New Note Issuance. We have successfully extended our debt maturity profile and significantly reduced our cost of debt, with no maintenance covenants on our debt.”
Frank Wilson added that the timing for the notes is not a coincidence: “The New Notes mature in 2023, which is aligned with the timing of our larger harvests.”
The company says that the company witnessed early interest, which demonstrates confidence in TFS business strategy.
TFS Corporation’s Outlook Remains Favourable
TFS Corporation Ltd is an Australian industrial company focused on the production of Indian Sandalwood products. It controls the world’s largest ethical and sustainable supply of Indian Sandalwood, a $1billion market characterised by exhausted natural reserves.
TFS offer profitable exposure to the Indian Sandalwood market. We are attracted to the Company’s growth trajectory, strong market position and high competitive barriers. Whilst capital intensity of its operations and external funding requirements are principal risks, we expect shareholders to be rewarded as the Company’s transition towards a more diversified, consumer driven earnings mix becomes salient.
Author: Simon Herrmann
Jul 21, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.