NextDC Ltd has announced it will be issuing another series of senior unsecured notes shortly. The company builds and operates data centres in Australia and New Zealand and it is seeking to raise a minimum $200 million.
The funds raised will be used to replace two series of notes issued in June 2014 and December 2015 which have a combined face value of $160 million. The balance will be used for general purposes. However, under the terms of the notes already on issue, optional redemption by NEXTDC before the June 2019 maturity date activates a bonus clause in each series. In both series 1 and series 2 notes, redemption in June 2017 is the second optional redemption date. For series 1 notes, the payment amount on this date is 103.50% of the principal while for series 2 notes it is 102.00%. Thus around $4 million will be used up in this way on top of any other costs of the issue.
In a move which is common for debt and hybrid securities listed on the ASX, NEXTDC will possibly offer existing noteholders the option to exchange holdings in existing series 1 and 2 notes for holdings in the new series. This brings up the question as to whether holders who take this option will still be eligible for the bonus optional redemption payments.
Series 1 and 2 notes have a June 2019 maturity date, but series 1 notes have a 8% coupon while series 2 notes have a 7% coupon. No further details on the new notes are available at this point but it is reasonable to speculate a similar structure to the first two series is likely. Swap rates have come down since then so perhaps the coupon on this next series will be lower again.