A look behind Sherritt’s double financing victory – by Barry Critchley (Financial Post – February 15, 2018)


The Canadian resource company bought back $121.223M of three classes of debt at an aggregate cost of $110.331M plus accrued interest

It looks like a classic win-win, now that the second part of a financing package unveiled one month back by Sherritt International has closed: the issuer raised more equity than originally intended and bought back more debt than anticipated — and at a slightly lower price.

Wednesday, Sherritt announced it had bought back $121.223 million of three classes of debt at an aggregate cost of $110.331 million plus accrued interest. Under normal circumstances, that debt was set to mature over the period of 2021-2025. Because of the buy-back the company now has about $600 million of debt outstanding — down from $720 million previously.

Sherritt bought the debt back through a modified Dutch auction: prior to the auction, it posted maximum prices; asked holders to submit their proposals, indicated those proposals “must be less or equal to the maximum price,” and then picked the so-called market-clearing price.

The three maximum prices per $1,000 face value were: $950 (2021 bonds); $900 (2023 bonds) and $880 (2025 bonds.) When the proposals were received, Sherritt was required to pay $950 per $1000 face, $890 and $870 respectively.

One theory is demand by holders to get out of the bonds was so high, the maximum price was lowered on two of the issues. Sherritt could accommodate that extra demand because it had raised more equity.

For the rest of this article: http://business.financialpost.com/news/fp-street/a-look-behind-sherritts-double-financing-victory