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Sirius Minerals offers bondholders extra shares for early debt to equity switch

The UK mine developer says the early conversion of bonds will release cash earmarked for interest and reduce overall indebtedness ahead of the anticipated Stage Two financing later this year

Sirius Minerals Woodsmith mine
Some US$308mln remains outstanding from the original US$400 bond series

Sirius Minerals PLC (LON:SXX) wants to swap debt for equity, as it has called its convertible bond holders to action.

The UK mine developer, in a stock market statement, highlighted that the bonds are trading substantially "in‐the‐money" and said it is seeking to accelerate conversion.

Sirius issued US$400mln of convertible bonds, carrying 8.5% interest and due in 2023, and the company said that some US$308mln remain outstanding.

The company is offering additional incentive shares to bond holders who convert via its ‘invitation’ process.

READ: Sirius Minerals' second fundraising round is expected in 2018, will the success continue?

It told investors that early conversion will reduce the group’s outstanding debt ahead of the anticipated Stage Two debt financing, which will be designed to cover the remaining mine development costs in North Yorkshire.

Sirius added that it would be able to release set aside cash, presently earmarked to cover future interest payments, and highlighted that it will help reduce any overhang in the trading of its shares (which are caused by as hoc conversions).

"At Sirius Minerals we are always searching for ways to improve and adapt all aspects of our business,” said Thomas Staley, Sirius Minerals finance director.

“This Invitation for conversion provides the opportunity to facilitate orderly conversion for bondholders while enabling the company to optimise its capital structure ahead of stage two financing later this year."

The invitation to convert is open until Monday April 16, at 3pm (UK time), the company expects to announce the outcome of the process on April 17 and the settlement for the new equity is expected by April 23.

Reflecting the potential dilution, in afternoon trading, Sirius Minerals shares were 8.3% lower at 27.7p.

In a note to clients, analysts at Liberum capital commented: "Whilst the offer is marginal in the context of share price volatility, it may help to shake out loose holders here."

The broker has a 'buy' rating and 60p price target on Sirius Minerals.

 -- Adds share price, broker comment --  

Quick facts: Sirius Minerals PLC

Price: 3.55 GBX

LSE:SXX
Market: LSE
Market Cap: £249.22 m
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