Construction major Aveng has launched an offering of a base size of R1.5-billion – with an upsize option of R500-million – of senior unsecured convertible bonds maturing in 2019, to enable the group to better manage its liquidity needs, diversify its funding sources and reduce its reliance on bank debt.

The bonds would be issued at 100% of their principal amount and were expected to carry a coupon of between 6.75% a year and 7.5% a year, payable semi-yearly in arrears on January 24 and July 24 of each year, with the first coupon to be paid on January 24, 2015.

The bonds would, subject to the passing of shareholder resolutions at a September 19 meeting, be convertible into ordinary shares of the company.

Unless previously converted, redeemed or repurchased and cancelled, the bonds would be redeemed at 100% of their principal amount on July 24, 2019.

Aveng said on Wednesday that it would have the option to call all, but not some, of the bonds at 100% of their principal amount, plus accrued interest, at any time on or after August 7, 2017, if the price of the ordinary shares exceeded 130% of the then prevailing conversion price over a specified period; and at any time, if 15% or less of the principal amount of the bonds remained outstanding. 

Until the shareholder resolutions were approved, the group would satisfy the exercise of conversion rights by making payments in cash.

“For so long as the shareholder resolutions have not been approved, we will have the option at any time by giving notice no later than ten dealing days prior to June 30, 2015, to call all of the bonds at the greater of 102% of the principal amount of the bonds – plus accrued interest – and 102% of the fair bond value of the bonds, plus accrued interest,” the group said in a statement.

In addition, the bonds may be redeemed at the election of bondholders, prior to the maturity date, following a change of control or a delisting event, in each case, at 100% of their principal amount plus accrued interest. 

The offering would be made by way of an accelerated bookbuild offering through a private placement to South African and international institutional investors outside the US, Canada, Australia and Japan.

The initial conversion price was expected to be set at a premium of between 30% and 35% above the reference share price on the launch date.

“The final terms of the bonds will be announced after the pricing has been determined,” the group maintained.

The bonds were expected to be priced on Wednesday and it was expected that settlement of the bonds would take place on or about July 23.

Aveng intended to apply for admission of the bonds to trade on the JSE within 90 days following settlement of the bonds. 

Barclays Bank and JP Morgan Securities were acting as joint bookrunners, while Nedbank, acting through its Nedbank Capital division, would act as co-manager.