Flight Centre Travel Group (FCTG) has announced an offering of up to $400 million senior unsecured convertible notes due in 2027.
The notes will have a coupon of 2.50 per cent per annum, paid on a semi-annual basis.
Upon conversion, the notes will be physically settled by the issuance of new, fully-paid, ordinary shares in FCTG, with an initial conversion price of $20.04 per share, subject to adjustment. The notes have a maturity date of 17 November 2027.
The net proceeds from the offering are expected to be approximately A$392 million, after deduction of commissions, professional fees and other administrative expenses.
FCTG intends to use the net proceeds from the offering to repay $100 million of the company’s existing debt, with the remaining proceeds applied to further strengthen its liquidity position.
Goldman Sachs International and Merrill Lynch Equities (Australia) Limited are acting as joint bookrunners on the offering. FCTG will lodge an offering circular in connection with the offering with the Singapore Exchange Securities Trading Limited.
Settlement of the offering is expected on 17 November 2020 and is subject to satisfaction of customary conditions precedent.
In announcing the offering of notes late yesterday, FCTG supremo Graham “Skroo” Turner said it will “substantially enhance our funding position with longer tenor, extended covenant relief and greater liquidity”.
“While trading conditions continue to improve, we continue to reduce our cost base and we remain prepared for almost all scenarios including a prolonged downturn,” he said.
“We are seeing gradual improvement in revenue trends, albeit from a modest level and, importantly, we continue to win key customers in our corporate business notwithstanding the difficult conditions.
“The recent easing of lockdown restrictions in Australia, our largest market, gives us confidence of further improvement in the near term.
“While we remain cautious given the environment in the Northern Hemisphere, we welcome the recent news of Pfizer’s positive COVID-19 vaccination trial data and look forward to further developments, given their potential to fast-track the recovery in travel activity.”
FCTG has also signed a commitment letter with its existing bank lenders to refinance its existing bilateral facility agreements with a new $350 million, three-year syndicated debt facility.
As part of the refinancing, the banks will waive FCTG’s compliance with its existing operating leverage ratio, fixed charges ratio and shareholder funds ratio covenants until 31 December 2022, at which point covenants will be calculated based on the six-month period from 1 July 2022 to 31 December 2022.
FCTG will be required to maintain a cash to total borrowings ratio of greater than or equal to 1:1 (with total borrowings to exclude the notes) until the full covenant testing resumes.
The bank debt refinancing is subject to conditions, including preparation of full documentation and the settlement of the offering.
SEE WHAT PEOPLE ARE SAYING