Turners says 75% of convertible bond holders elect to convert to shares

Financial services firm Turners [NZX: TNR] says 137 holders of its convertible bonds have elected to take shares when they come due at the end of the month, amounting to 75% of the debt on issue, or $17.4 million.

Chairman Grant Baker says the conversion rate is higher than expected and "reflects the market's confidence in the group's strategy and continued growth."

Last month, the company announced a new offer of up to $30 million of convertible bonds, subject to approval by shareholders at their annual meeting on September 14.

Approval is needed under NZX listing rules covering related parties because the biggest shareholders in Turners, Hugh Green Investments with 22%, the Business Bakery with 13%, Harrigens Trustees with 7.6 % and Bartel Holdings with 6.9 % plan to participate in the bond issue and will increase their shareholdings when they convert.

The four shareholders own 49.8% of the existing bonds that mature this month and will be entitled to up to 46% of the new issue under the maximum allocation priority for existing bondholders.

Proceeds of the new issue will be used to finance the redemption of the existing bonds that aren't converted, which amount to about $5.6 million, while the balance will be held for potential acquisition opportunities.

The new bonds mature on September 30, 2018, and pay annual interest of 6.5%, while the maturing two-year bonds paid 9%.

The new bonds would be on the same terms except the conversion rate would be the lesser of $3.75 or a 5 % discount to the average daily volume-weighted price of the shares in the 90 days prior to the maturity date. For the existing bonds, the rate was $3.

Evaluation
An evaluation of the new offer by consultancy Campbell MacPherson concludes the 6.5% interest rates on the new bonds is fair to non-associated shareholders.

It values the $1 face value new bonds in a range of $1.03-1.10, including the 'option' value of the conversion terms, and says the rationale for the new issue is "sound".

Chief executive Todd Hunter says the company is pleased with the level of conversion of the existing bonds to shares, which won't alter the plans for the new issue of up to $30 million.

Turners’ shares last traded at $3.05 and have gained about 13% in the past 12 months.

Turners became the name for the group after Dorchester Pacific acquired Turners Auctions in 2014 to complement its largely automotive loan book and insurance business. It survived the collapse of many finance companies in the wake of the global financial crisis.

Last week the company acquired a one-hectare industrial site on the corner of Roscommon Rd and Vogler Dr in Wiri, South Auckland, for $4.8 million, which it says will allow it to expand its truck and machinery business.

In July it bought Auckland used car importer and dealer network Buy Right Cars for $15.3 million, adding eight dealer sites across Auckland and a workshop in Manukau.

Previous acquisitions include Levin-based lender Oxford Finance, Greenwich Life Insurance and Christchurch-based Southern Finance.

(BusinessDesk)

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