Australian fintech Zip Co has entered a trading halt as it undertakes a capital raise and liability management exercise.
In a statement to the Australian Securities Exchange, Zip requested the trading halt stay in place until it releases a statement on the raise and liability management exercise, or on Tuesday 13 June – whichever comes first.
In a further statement to the ASX, Zip revealed it planned to reduce its net debt (of $330 million in convertible notes) by $192.2 million.
Zip has invited $39.9 million of eligible note holders to convert their notes into Zip shares at a price of just over $12 per share. They will also receive a cash incentive of up to $17.4 million.
Note holders who do not participate will continue to hold their notes. In Zip’s prior liability management exercise in December 2022, early converters received 23 cents on the dollar.
Zip also confirmed it would undertake a fully-underwritten institutional equity placement, where it would issue shares at a fixed price of $0.47 per share, representing a 6.9% discount to the last close price of $0.505 per share on 7 June. The proceeds would be used to fund the cash incentive under the conversion invitation. The placement is expected to settle on 14 June.
Goldman Sachs Australia will act as dealer manager in connection with the conversion invitation, and the underwriter in connection with the equity placement.
Zip co-founder and global chief operating officer, Peter Gray says the liability management exercise would aid the business on its strategy to fast-tracking profitability.
“We are pleased to launch this liability management exercise which will allow us to retire a significant portion of our liabilities at a fraction of face value and restructure our $330 million zero coupon convertible note to a liability of $137.8 million,” Gray says.
“Once completed, the transaction is expected to be cash neutral for the company, accretive to Zip shareholders and strengthen Zip’s balance sheet, positioning the company for the next leg of growth.”
The company re-affirmed it would have sufficient available cash and liquidity to deliver positive Group Cash EBITDA during the first-half of FY24.
Key background
- Zip, which saw its share price peak at $12.35 in February 2021, has fallen below its initial public offer price and was trading at $0.50 prior to the halt.
- In its third-quarter update, delivered in April 2023, the company revealed its revenue was up 15% year-on-year, its transaction volume was up 9% and its transaction numbers were up 12%.
- It recently divested from its non-core businesses in Central and Eastern Europe and South Africa and winded down operations in the Middle East. It’s embarking on a strategy to simplify its portfolio by focusing on its Australian, New Zealand and US businesses.
- The fintech last announced a liability management exercise in December 2022. The transaction resulted in the conversion of $70 million of the company’s $400 million existing convertible bonds due 2028.
More to come.
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