The convertible bonds, due 2017, will bear interest at the rate of 7% a year and will have a conversion price of S$0.167 ($0.135) per share.
The convertible bonds would be secured by a first preferred mortgage over the vessel Kalpana Prem, which is 12 years old and has a book value of $25.71m as at 31 March 2011.
“The rationale for the bonds issue is to raise funds for working capital requirement, dry dock expenses, charter payments, loan servicing and capital expenditure in the normal course of business,” Mercator Lines (Singapore) said.
With shipping markets currently going through a low cycle with the BDI at its lowest in the past 25 years, the directors believe it would be prudent for the company to shore up its liquidity and explore raising long-term funds in the form of convertible bonds.
“Moreover, with the dry bulk industry BDI at an all time low, this has further diminished the opportunities for shipping companies to raise funds from the capital markets,” the company said.
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