SWALA Oil and Gas is planning to issue a seven-year retail bond payable in either available funds or the firm shares. The convertible bond, coming into three tranches, will have a coupon rate of 12 per cent to 16 per cent.
The issuer also said in a statement that at maturity the investors may be paid in either available funds or Swala shares at a 12.5 per cent discount. Swala share in the last seven month stagnated at 500/-.
Swala’s Chief Executive Officer Dr David Mestres Ridge said the funding of the agreed investment is progressing and was awaiting only the completion of ongoing due diligence.
“Our upcoming roadshow, focused as it is on the local Tanzanian bond investors, aims to maximise local participation in an African energy sector project with significant potential,” Dr Ridge said.
He added: “We look forward to providing the market with further updates as our investment project advances.” The statement issued by the oil and gas company said the issue is being arranged by the specialist frontier markets investment bank, Exotix Capital.
However it was silent on the amount to be raised till stakeholders’ discussion completed. Among the issue on table before launching the bond in clude Swala’s board of directors has authorised the creation of 50 million preferred shares each with a face value of one US dollar, 20 million of which will be issued to the vendor as part of the transaction and the other 30 million of which shall be available to Swala’s current shareholders in exercise of their statutory pre-emption rights.
“As with the preferred shares, the retail bonds will also be offered to the Swala shareholders,” the statement said. Preferred shares generally have a dividend that must be paid out before dividends to common shareholders, and the shares usually do not carry voting rights.
Swala listed on Dar es Salaam Stock Exchange (DSE) three years ago, has secured, subject to ongoing legal due diligence, funding for its first investment tranche from a major US investor, along with a seven-year capital expenditure (CAPEX) draw-down facility from a major South African investment fund.
Furthermore, the facility will be used by Swala to optimise its forecast cash flow profile and ensure that it can meet any project development obligations. “The overall capital raising will help to finance a material transaction,” the statement said.
Swala is the first oil and gas company to be listed on an East African stock exchange with significant local ownership.