- Online travel agent Webjet (WEB) will receive another cash top-up, following a €100 million convertible note sale
- Webjet will walk away with roughly A$160 million in net proceeds from the offering, which will be used to pay off debt
- Convertible notes are essentially loans, which have cash value and can be converted to shares
- Under the terms of the sale, the notes will be discounted 2.5 per cent per annum and once converted, each share will be worth over $4 each
- The notes will mature in 2027, meaning Webjet will need to pay the amount by that date
- Shares in Webjet are trading down 3.16 per cent, at $3.06 each
The company will walk away from the sale with an estimated A$160 million in net proceeds.
Short term debt, long term gain
In essence, convertible notes are loans which have cash value and can be converted into shares.
Under the terms of the sale, the notes will be discounted 2.5 per cent per annum and paid on a semi-annual basis.
The notes will also be cash-settled, and once converted, each share will be worth over $4 each, subject to adjustment.
The convertible notes will be listed on the Singapore Stock Exchange on July 13, 2020.
While all of the notes sold will mature in 2027, meaning Webjet will need to pay out the loans by that date.
The roughly A$160 million raised will be used by Webjet to pay off $50 million in debt, as well as to fund any future acquisitions, though none have been announced at this stage.
The online travel agent has been severely impacted by COVID-19, as has the entire airline industry, with air travel grounded amid lockdowns.
Shares in Webjet are slightly down following today’s announcement, trading for $3.06 cents per share, a drop of 3.16 per cent at 3.06 pm AEST.