On 2 September 2021, Latitude Group Holdings (ASX: LFS) launched an Offer for Latitude Capital Notes (ASX: LFSPA) to raise $125 million with the ability to raise more or less.
These securities are structured as redeemable, perpetual, unsecured, convertible and subordinated notes of LFS. The purpose of the transaction is to raise capital for LFS, allowing it to pursue and accelerate growth opportunities.
Distributions are expected to be discretionary, cumulative but not compounding, floating rate, franked at the same rate as LFS ordinary shares and paid quarterly in arrears (the LFS interim dividend was unfranked, but the Board expects the final dividend to be fully franked). Whilst non-payment of distributions will not constitute an event of default, on the occurrence of non-payment, ordinary equity dividend and capital management restrictions will apply. The margin is guided at 4.75-5.00% p.a. above the 90-day BBSW.
This security has no fixed maturity date and there is no obligation on LFS to ever redeem or convert the Notes. LFS can choose to covert or redeem some or all of the Notes on 27 October 2026 (the First Optional Exchange Date) or on any subsequent distribution date. If the Notes are not converted or redeemed on 27 October 2026, the margin will step-up by 3.00% p.a. LFS can also opt to convert or redeem all the Notes following a Tax, Accounting or Regulatory Event. On occurrence of a Change of Control Event, LFS may redeem (not convert) all of the Notes, should LFS not redeem all of the Notes on 27 October 2026, the margin will increase by an additional 5.00% (in addition to the 3.00% non-call step-up). The terms contain no events of default. The Notes are subordinate to all but ordinary equity.
Relative value is difficult to ascertain, however, our analysis suggests a material new issue premium is offered and the security is attractive on such basis. We recommend investors Subscribe.