Carillion says it will take advantage of “favourable conditions” in the market to issue £170m of senior unsecured convertible bonds, which will be used to repay borrowing and fund acquisitions.
Under the bonds, debt will be transferred from Carillion to its bondholders. Over this time, bondholders will earn interest on the debt that they hold as part of the deal.
The bonds, which will be issued by Jersey-based Carillion Finance on 19 December, can be converted into ordinary shares in the company within five years.
These shares will represent up to around 9.99% of the company’s issued share capital immediately prior to the offering.
Convertible bonds typically have a coupon rate - the interest earnings that the bondholder will receive - lower than that of similar, non-convertible debt bonds.
Consequently, Carillion’s bonds are expected to carry interest payments of 2.5% per annum payable semi-annually in equal instalments.
Funds raised from the sale of the bonds will be used to repay borrowing, as well as funding recent acquisitions and “general corporate activities”.
Carillion said that it “continues to have a robust balance sheet with strong cash flow and net borrowing reducing in line with expectations”.
Its H1 results saw pre-tax profit grow from £64.2m in H1 2013 to £67.5m in H1 2014. Group underlying operating margin grew from 5.1% to 5.5%.
Net borrowing stood at £203.6m, down from £270.8m, while committed borrowing facilities were at £850m, up from £802.5m.
It was also appointed to the £190m Midlands batch of Priority School Building Programme schools by the Education Funding Agency.