John Keells Holdings PLC (JKH) yesterday announced plans to raise the equivalent of US$ 75 million worth foreign direct investment by way of a private placement unlisted convertible debentures denominated in rupees to certain controlled affiliates of Fairfax Financial Holdings Limited, headquartered in Canada.
The transaction amounts to a value of Rs.27.06 billion.The debentures will be issued at a price of Rs.130 each, resulting in the issue of 208,125,000 debentures to Fairfax with a maturity period of three years.
The debentures will accrue interest at a nominal rate of 3 percent per annum. Fairfax can convert each debenture to one new ordinary share of JKH after 18 months from the date of issue until maturity. The maximum post-conversion dilution as a result of the issue amounts to 13.06 percent if all debentures are converted into new ordinary shares of JKH.
The proceeds from the issue will be used to support the company’s investment and financing obligations, particularly in terms of managing foreign currency linked funding requirements in investments such the West Container Terminal in the Port of Colombo and will significantly strengthen the financial position of the group during these unstable times.
The recent steep depreciation of the rupee together with the significant increase in interest rates has resulted in an increase of the funding commitments of the group. The transaction will enable the group to support this investment pipeline and match its foreign currency linked project costs whilst reducing the need to fund some of its requirements through the local banking sector given the stresses on capital and interest rates.