Azgard 9 Limited, a denim jeans and other garments manufacturing company, will offer Rs 400 million rated, listed, secured and convertible Term Finance Certificate (TFC) for public subscription from September 19-20, 2005.
The total TFC amount is Rs 2,000 million that includes Rs 1,600 million as private placement (pre-initial public offer) and Rs 400 million would be offered as an initial public offer (IPO). Green shoe option of Rs 400 million could be used in case of over-subscription. It would bring the IPO to a cumulative amount of Rs 800 million.
Faysal Bank Limited and Jahangir Siddiqui Capital Markets are acting as advisors and arrangers to the transaction.
Azgard 9 Limited has successfully raised Rs 1600 million through 22 financial institutions and provident funds that includes Faysal Bank Limited, United Bank Limited, Pakistan Income Fund, Allied Bank Limited, My Bank Limited, National Bank of Pakistan, Union Bank and other financial institutions.
Funds raised through TFC would be utilised for balancing, modernisation and restructuring of current production facilities that would include a new denim unit at Manga and a new ring-spinning plan.
Azgard 9 Limited was established in 1993 as a joint venture between a leading Italian denim fabric producer, Legler SpA, and a Pakistani business house. After some time, Nafees Cotton Mills Limited and Nafees Spinning Mills were also merged to enhance the growth potential of the company. The joint venture with Legler SpA ended in March 2004.
In a successful turnaround strategy, the management focussed on manufacturing value-added denim products with increased volumes and establishment of independent sales and marketing organisation. This was how Azgard 9 Limited appeared on the apparel scene.
The TFC issue of the company has a tenor of seven years including a two-year grace period. The profit rate on the instrument is six months (Karachi Interbank Offer Rate (KIBOR) plus 240 basis points without any floor or cap).
The TFC issue also contains a call option allowing the company to prepay the facility, either in full or in part, or any redemption date after 30 months from the date of issue by providing a 45 days advance written notice on any profit payment date.
This offer is unique in its innovative TFC issue for the market, which contains a conversion option. The option allows TFC holders to the right of conversion up to 25 percent of the value of their TFCs into ordinary (non-voting) shares at a discount, thus, reducing debt sock of the company, if any, between January 1, 2008 to March 31, 2008.
Azgard's TFC is the first ever in the financial history of the country to be assigned a rating of "A+" (single A plus) by PACRA and JCR-VIS that implies low expectation of credit risk emanating from a strong capacity for timely payments of financial commitments.