Subsequent to the takeover by Tetra Tech, Inc, Coffey has notified Noteholders of its intention to redeem its notes early at a premium
As previously covered in FIIG research updates, Coffey International has been successfully taken over by US based Tetra Tech, Inc. We also explained that given Tetra Tech can borrow substantially cheaper than Coffey’s bond margin of 465bps it has an economic incentive to buy back the more expensive bonds, meaning there was a possibility a premium may be offered if the group seeks to payout the bonds prior to the first call date.
Tetra Tech has now stated that Coffey’s Floating Rate Notes maturing in September 2019 will no longer be appropriate as an outstanding form of debt funding for the Coffey group. As such, Coffey is proposing an amendment to the terms of the notes to allow them to be redeemed early. To incentivise Noteholders, Coffey is offering a premium capital price of $105 per every $100 face value, plus accrued interest.
The redemption price represents a material premium to what noteholders are currently entitled to under a 'Change of Control' event ($101), and a premium to what Coffey would be obliged to pay to redeem the notes in September 2017 ($103), September 2018 ($101.5) or upon maturity in September 2019 ($100).
Therefore, this is an attractive offer and a good outcome for Noteholders from a company which was potentially facing financial difficulties prior to its takeover. For Noteholders that invested at issue in September 2014 at $100 the $105 offer represents an annualised rate of return equivalent to circa 10.4% p.a.
All Noteholders of the Coffey floating rate Notes due 12 September 2019 should have received an email from FIIG including a Notice of Circulating Resolution and Explanatory Memorandum from Coffey as well as research on proposed Resolution.
Please contact you FIIG representative if you have any queries