New Hope Convertible Bond
Jarden acted as Joint Lead Manager and Underwriter on New Hope’s A$300 million convertible bond issuance.
Expertise
Structuring underwriting and executing convertible bond issuances, global distribution, equity and credit positioning and optimising access to capital markets while balancing investor demand and minimising shareholders' dilution.
Strategic Context
New Hope Corporation (ASX:NHC) is a leading Australian thermal coal miner and a major supplier to premium Asian energy markets. On 3 July 2024, New Hope launched a successful A$300 million convertible bond issuance to secure flexible funding at attractive terms. This transaction was structured with a 4.25% coupon rate and a 30% conversion premium, providing New Hope with capital efficiency while minimising immediate equity dilution.
The issuance marked New Hope's return to the convertible bond market following its inaugural issuance in 2021. Despite potential ESG concerns related to coal exposure, the bond offering was significantly oversubscribed, with 2.3x demand, attracting over A$700 million from global investors.
Execution
Jarden acted as Joint Lead Manager and Underwriter, ensuring a fully underwritten structure. The transaction was launched following two days of pre-launch investor engagement, leading to strong demand from cornerstone investors. Due to positive feedback, the issue size was increased from A$250 million to A$300 million.
Key structuring highlights included:
- Conversion price set over a reference price, reflecting a 3% discount to the last close price.
- Dividend protection threshold of 16 cents per annum, ensuring no conversion adjustments below this level.
- Capped Call Strategy, enabling New Hope to hedge against potential dilution, increasing the effective conversion price to 80% above the prevailing share price.
- Five-year maturity, with a three-year investor put option, offering flexibility to investors.
The entire preparation and execution process was completed within 2.5 weeks.
Outcome
The A$300 million convertible bond issuance was highly successful, allowing New Hope to:
- Enhance financial flexibility, securing capital for general corporate purposes.
- Take advantage of favourable market conditions, with an 8% share price rally in the three days leading up to the launch.
- Secure funding at attractive terms, demonstrating strong access to capital markets despite ESG sensitivities associated with the coal industry.
- Minimise dilution risk, through the implementation of a Capped Call structure, raising the dilution threshold well above New Hope’s all-time high share price.
This transaction reinforced New Hope’s ability to efficiently access capital markets, leveraging convertible bonds as a strategic financing tool while maintaining balance sheet strength and preparing for future growth opportunities
