Pak Elektron (PAEL), one of country's pioneer manufacturers of electrical goods, has decided to issue 40 million shares to National Bank of Pakistan (NBP) to swap its Rs 3.2 billion debt into equity. The decision was taken by the company's Board of Directors, according to a stock filing, in its meeting held Friday last.
The NBP would be offered 40 million ordinary shares without right offering for Privately Placed Term Finance Certificates it holds. As per the given formula, market price of the company should be Rs 108 in order to retire the NBP's debt at Rs 79 issue price of new shares.
If materialised, according to analysts at Topline Research, the deal would see a diluted impact of around 4.0-5.0 percent on the earnings of PAEL's existing shareholders. "If we assume that conversion would take place at company's current market price of Rs 79.4 then the issue price of new shares would be Rs 59.3," said Topline analyst Muhammad Tahir Saeed. Thus, the company would be able to retire Rs 2.4 billion of its debt for 40 million shares and remaining Rs 793 million would be outstanding.
In this case, overall earnings dilution would be 6-7 percent, Khan said. These shares would be issued to NBP as other than right issue in order to settle its old loan. To recall, PAEL restructured its debt in 2009-11 due to significant liquidity constraints primarily driven by low business activity and cash flow issues. All lenders except NBP, largest lender at that time, allowed two-year grace period to PAEL. Restructuring of loans provided breathing space to the company. Set up in 1956 by Malik Brothers in technical collaboration with M/s AEG of Germany, PAEL has 23 percent market share in refrigerator, contributing 90 percent to appliances division revenues.
Comments
Comments are closed.