Flight Centre Travel Group Ltd [ASX:FLT] has successfully priced its offering of $400 million senior unsecured convertible notes due 2028.
As flagged on Wednesday, Flight Centre issued the convertible notes to repay debt and fund growth after COVID-19 impacts.
Flight Centre Travel Group Ltd [ASX:FLT] Centre share price is currently trading at $20.19 a share, down 6.70%.
However, the FLT stock still managed to gain 45% over the last 12 months as investors reappraise the travel sector amid rising vaccination rates.
Flight Centre’s $400 million convertible notes issue
FLT’s notes will have a coupon of 1.625% per annum, to be paid on a semi-annual basis.
Upon conversion, notes will be physically settled by the issuance of new fully paid ordinary shares in FLT with an initial conversion price of $27.30 per ordinary share.
The notes will have a maturity date of 1 November 2028.
After deduction of commissions and professional fees, the net proceeds from the offering are expected to be around $393 million.
What will Flight Centre do with the funds?
In short, repay debt and kickstart growth.
FLT intends to use the proceeds to repay a Bank of England COVID-19 Corporate Financing Facility on maturity in March 2022 and then fund future growth opportunities.
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A good move by FLT to strengthen the balance sheet?
FLT Managing Director Graham Turner yesterday commented:
‘This is a continuation of our proactive capital management strategy that provides the balance sheet strength to fund our growth plans in a cost-efficient manner to capitalise on the recovery in travel demand we are now starting to see.
‘The convertible bond substantially enhances our capital position and extends Flight Centre’s debt maturity profile, with the funds raised used to repay the CCFF, which is due to expire in March 2022, and drive future growth opportunities in both corporate and leisure travel at a time when competitors are unable to invest in their offerings.
‘While we were comfortable with our liquidity position previously, this gives us additional flexibility and capacity to invest in the recovery and create further shareholder value as vaccination programs gain momentum worldwide, restrictions are lifted and demand takes off.’
Mr Turner thinks Flight Centre can return to monthly profitability ‘within FY22’ in the leisure and corporate segments.
This comes after FLT posted an FY21 underlying loss of $507 million, with Q4 FY21 showing signs of recovery.
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