Report for 3Q 2013 as at 30.09.2013on the compliance with the terms and conditions of the debenture loan issue of corporate convertible bonds ISIN Code BG2100006134,issued by Industrial Holding Bulgaria Plc in 2013
REPORT
for 3Q 2013 as of 30.09.2013
on the compliance with the terms and conditions of the debenture loan
issue of corporate convertible bonds ISIN Code BG2100006134,
issued by Industrial Holding Bulgaria Plc
This Report on compliance with the terms and conditions of the debenture loan – issue of corporate convertible bonds ISIN code BG2100006134 issued by Industrial Holding Bulgaria Plc. /IHB Plc. or the Holding/ includes information regarding the maintenance of the financial ratio presented with the interim consolidated statement for the3Q of 2013as of30.09.2013.
1. Performance of theobligations of IHB Plcundertheissuetermsandconditions
1.1. Convertible bonds listing at Bulgarian Stock Exchange - Sofia AD
On03.06.2013the trading ofcorporate bonds issue 2013 of IHB Plc started at BSE-Sofia AD, bonds segment.The stock exchange code is 4IDE.The issue amount is BGN29,999,800.00and the number of bonds is299,998with nominal value of BGN 100 each.
The market batch is one lot equal to 10 bonds. The listing price as of 03.06.2013is 100% of the nominal value.
The transaction cash settlement is executed in BGN.
1.2. Holding of General Meeting of Bondholders and election of a Representative of the bondholders
On 17.05.2013 the First General Meeting of Bondholders was held and Mrs. AntoanetaMihailovaDimolarova, attorney, was elected as a Representative of the bondholders.The Representative will be entitled to a monthly remuneration of BGN 250 (two hundred and fifty).
1.3. Interest payments
Nominal interest rateinthe current issueof convertible bondsis fixed atannually rate of 6.5 percentover the life ofthe loan.
The interest payment period is a 6-month period with fixed dates as follows: 18.10.2013; 18.04.2014; 18.10.2014 and 18.04.2015.
Bondholdersregisteredassuchin the Central Depository AD notlaterthan 3 /three/ businessdayspriortointerestpaymentdate, respectively 5 /five/ businessdayspriortofinalinterestpaymentdate, whichisthefinalmaturitydateoftheissuehavetherighttointerestpayment.
On 18 October 2013 the first interest payment of the issue convertible bonds was made. The interest payments are made by Central Depository AD.
1.4Conversionratio and conversion price
With the decision for bond issue 2013, the Managing Board of Industrial Holding Bulgaria has determined the number of new shares to be converted into one bond when exercising the right of conversion and their price, the so called conversion ratio and respectively conversion price.
The conversion price is equal to the nominal value of a share divided by the conversion ratio – the price on each new share is acquired when converting bonds into shares.
The Managing Board of Industrial Holding Bulgaria set a conversion ratio of 100.00 shares for each bond with a nominal value of BGN 100 which defines conversion price of BGN 1.00;
Under the terms and conditions of the debenture loan it is possible to adjust the conversion ratio and conversion price when certain events occur – for example issue of new shares (capital increase of Industrial Holding Bulgaria through cash), issue of new incremental shares (capital increase of Industrial Holding Bulgaria by converting profit into capital), payment of dividends, reduction of capital. The issuer will notify the bondholders in due time in the same manner that it discloses information to the Financial Supervision Commission, Bulgarian Stock Exchange, Central Depository and the public.
2. Utilization of the debenture loan funds
As specified in the Prospectus, the Holding intends to use the funds raised through the issue to reimburse the debenture loan under a previous issue of convertible bonds - ISIN BG 2100018113, issued by Industrial Holding Bulgaria Plc in 2011 for partial refinancing of Dimond Sky Ship, expansion of Dockyard Port Burgas and financing other small projects of subsidiaries.
Use / Amount(BGN) / NoteRepayment of debenture loan / 21,713,900 / issue of convertible bonds ISINcodeBG 2100018113
Dimond Sky Ship (N 102) / 6,200,000 / Partial refinancing
Dockyard Port Burgas AD / 1,000,000 / Port expansion
Other projects / до 1,044,208 / Other projects of subsidiaries
TOTAL / 29,958,108
On17.04.2013the public offering was successfully closedand on24.24.2013 the Trade Registry published announcement for opening of new debenture loan. The amount received from the subscribed and paid convertible bonds is BGN29,999,800.00. The net amount ofproceedsfrom the public offeringafterdeducting the expensesof the Issuer, paidcommissions, fees, etc..expenses, includingfees paid to theFSC amount to BGN29,864,047.
As statedin the Prospectus, the principal amount of funds raisedfrom thebondissuein 2013is intendedfor early repaymentof the loanunderthe previousissue of convertiblebonds ISINcode BG2100018113issued byIHBin 2011.
On 26.04.2013 the last interest payment and the payment of the principal amounting to BGN 21,713,900 of the issue convertible bonds issued by Industrial Holding Bulgaria PLC, ISIN code: BG2100018113 and BSE code 4IDD was made. Bondholders registered with the Central Depository as have had the right on interest payment 5 working daysprior to the dateofrepaymentof principal. The interest rate is 8 % annually.
With the remaining funds raisedfrom the issueIHBprovidesrefinancing andfinancing of investment projectsofits subsidiariesmainlyin maritimetransport and portactivities.IHBprovides thisin the form ofloans and/ or acquisition ofshares ofthesecompanies, includingandsubscription of shares fromcapital increase.In order topartiallyrefinancethe construction ofthe last shipDiamondSky(with construction number 102)inApril 2013General Meeting of ShareholdersofKLVK AD decided to increasethe capitalthroughthe issuance of2,200,000 ordinary registered voting shares with a nominal value of BGN 1and issue price of BGN 2.78each.All shares ofthe capital increaseare subscribed for byIndustrial HoldingBulgariaAD. The amount of BGN 6,116,000isfromfunds raisedby the newbond issue. The capital increasewas registered inthe Registry AgencyonMay 20, 2013.
In 2013 Bulyard SI aims to maintainemploymentcapacitywithrepair, reconstruction of vessels andmanufacturing of metalhulls and shipsections.The restof the areawillbe used as awarehouse. The Companyhas the capacity to rent vacant landandwarehouses or use themfor other production.
At the endof 2012the companystartedactive measuresto optimizeproduction capacitybyfocusing onasmall areaandimprove management.As a result realised revenue fromsale ofnon-operatingassets -mainlymachinery and equipment.At the time thereport, August 2013,IHB has providedloans toBulyard SIamounting to BGN 2,015thousand in total from the newbond issue. The funds arefor payment underletters of creditin connection withoperating activities,repayment of loansto related partiesandworking capitalof the company.
As at 30.09.2013 IHB has utilised the funds raised under bond ISINcode BG 2100006134.
Financing ofinvestment projects of subsidiariesis carried out inorder of their occurrencein time.Priority is given to ongoing projects. IHBis also ready to finance current projects through bank loansand leasingschemes.
In view ofthe trendsanduncertainties regarding thedevelopment of thedifferent branches, the IHBmanagementreserves the rightto restructure theinvestment intentions withinthe group in accordancewith the changein priorities.For example,financing provided for the expansion ofthe portof DockyardPort Bourgashas evolvedover time.InApril 2013the company was ableto negotiatealease planfor about BG 2million for supply and installation of64-ton mobilecraneLIEBHERRused in port activities and in operationfromearly August.Itwill significantlyincrease the capacityof the port andshortencargo handling time, which will improve the competitiveness ofthe company.The term of theleaseexpires inOctober 2016.
In the comingyears new capitalexpenditure withinthe groupcan be madein relation tofinancingordevelopment ofnew or ongoing projects of IHBand its subsidiaries, including expansion of portterminalin Burgas,contracts for constructionof new ships, investing in priority projectsand more.If necessary,IHB will continueto fundthe development ofsubsidiaries.
Capital expenditures can be made for acquisitionsand theexpansion of businesses.
Decisionsabout the amountandsources of the necessaryfunds will be madein each case.
3. Maintenance of financial ratios for 3Q of 2013 as at 30.09.2013
All calculations have been made on a consolidated basis.
The data for 2011have been reclassifiedin 2012for comparative purposes.
Financial ratios(on a consolidated basis) / 2008 / 2009 / 2010 / 2011
reclassified data / 2012 / 2013 – 2015
projection / 3Q
2013
Liabilities/assets ratio / 39% / 42% / 42% / 46% / 45% / ≤ 65% / 38%
Current liquidity / 1.7 / 1.5 / 1.0 / 1.3 / 0.3 / ≥ 0.5 / 0.5
Interest-bearing debt/assets ratio / 8% / 15% / 22% / 34% / 34% / ≤ 50% / 33%
Liabilities/assets ratio
Liabilities/assets ratio is calculated by dividing the total short-term and long-term borrowed funds by the total assets as per the balance sheet as at a particular date. IHB Plc has undertaken to maintainits liabilities/assets rationot higher than 65%.The interest-bearing debt/assets ratio as at30.09.2013 is38%.
Current liquidity
The current liquidity is calculated by dividing the total short - term assets in the balance sheet by the total short-term liabilities. IHB Plc has undertaken to maintainits current liquidity ratioat the minimum of0.5utill debenture loan repayment.The current liability ratio as at 30.09.2013is0.5.
Itiscalculated based on assetsheld for sale, respectively liabilitiesdirectly associated withthoseassetsas current assets, as short-term assets, respectively short-term liabilities, given the management's intentto sellthem in short term.
Interest-bearingdebt/assetsratio
Interest-bearingdebt/assetsratioiscalculatedbydividingthetotalshort-termandlong-terminterestpayablesbythetotalassetsasperthebalancesheetasat a particulardate. IHB Plchasundertakentomaintainitsinterest-bearingdebt/assetsratiowithinthelimitof 50% utilldebentureloanrepayment. Theinterest-bearingdebt/assetsratioasat 30.09.2013is 33%.
DanetaZheleva,
CEO of Industrial Holding Bulgaria PLC
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