Nyrstar (OTCPK:NYRSY) has today announced it will raise $470M in debt and $330M in equity to refinance the existing debt and to fund further expansion projects amongst which is the Port Pirie smelter project. The $470M in debt will be raised in senior unsubordinated notes maturing in 2019 and will be used to repurchase all of the 5.5% bonds maturing in 2015 as well as some of the 5.25% bond maturing in 2016. As the 2015 bonds cannot be called, the repurchase will happen as a tender offer, and the indicative price to rebuy these bonds is between 101.75% and 102.25% of the par value.
This doesn't come as a surprise to me as in my previous article I already warned that 'Nyrstar was up to something'. Hidden in the press release, the company stated it was evaluating possibilities to raise capital and to repay the 2015 bonds before the maturity date. I was quite surprised that none of the major financial publications picked this fact up, and that's why I decided to write an article about it.
As you might know, I purchased the bonds maturing in 2015 in the mid-80s just a year ago, so this indicative tender offer of 102% of the nominal value could result in a return of more than 15% in just a year time. So the question is whether or not I should keep the bonds until the maturity date in April 2015 or tender them into the offer. Assuming the offer will be effective early October, I will receive 2.75% interest and a 102% payment for a total of 104.75%. Should I keep the bonds until the maturity date, I would receive 105.5% of the nominal value (100% principal repayment + 5.5% interest). This might sound like tendering the bonds would be a bad idea, but keep in mind you can invest the proceeds in another investment. If you can earn more than 0.75% in 6 months, then tendering is a good idea, and I think I will tender my bonds if the offered price is 102% of par value or more.
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The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I own the bonds maturing in 2015.
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