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Simonds Farsons Cisk plc - Details of New Bond Issue

Wednesday, August 2nd, 2017

On 2 August 2017, Simonds Farsons Cisk plc published a Prospectus following regulatory approval for the issuance of €20 million 3.50% unsecured bonds maturing in 2027.

The salient details of the new bond issue are as follows:

Coupon:

3.50%

Amount Offered:

€20 million

Issue Price:

100% (par)

Interest Payment Date:

Annually on 13 September (first interest payment date is 13 September 2018)

Maturity:

The bonds will mature at 100% (par) on 13 September 2027.

Status:

The Bonds constitute the general, direct, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu, without any priority or preference among themselves and with other unsecured debt of the Issuer.

Use of Proceeds:

The net proceeds from the Bond issue, estimated at approximately €19.6 million after issuance costs, will be used by the Issuer for the following purposes:

  • the redemption of the outstanding €15 million 6% Simonds Farsons Cisk plc 2017/20 bonds which will be redeemed on 13 September 2017; and
  • the balance of €4.6 million for general corporate funding purposes, including the part-funding of a number of capital investment projects which are either in the process of completion or are committed to be undertaken in the near term.

Deadline for ‘Existing Bondholders’:

Tuesday 5 September 2017 at noon with applications for a minimum of €2,000 and in multiples of €100 thereafter.

‘Existing Bondholders’ are holders of the 6.0% Simonds Farsons Cisk plc 2017/20 bond as at the close of trading on 28 July 2017.

Interested applicants are kindly requested to contact us for further information on the application procedure.

Listing:

Official List of the Malta Stock Exchange

Risk Factors:

Prospective investors are urged to read the Prospectus issued by Simonds Farsons Cisk plc dated 31 July 2017 including the Risk Factors which are found in the Registration Document on pages 25 to 29 and in Section 2 of the Securities Note found on pages 72 and 74. The below is a summary as contained in the Summary Note however the below does not replace the need for Prospective investors to read all the Risk Factors mentioned in the Prospectus as aforesaid.

Holding of a Bond involves certain risks including those described below. Prospective investors should carefully consider, with their own independent financial and other professional advisers, the following risk factors and other investment considerations, as well as all the other information contained in the Prospectus, before deciding to acquire the Bonds. Prospective Investors are warned that by investing in the Bonds they may be exposing themselves to significant risks that may have the consequence of losing a substantial part or all of their investment.

This document contains statements that are, or may be deemed to be, “forward-looking statements”, which relate to matters that are not historical facts and which may involve projections of future circumstances. They appear in a number of places throughout the Prospectus and include statements regarding the intentions, beliefs or current expectations of the Issuer and/or its Directors. These forward-looking statements are subject to a number of risks, uncertainties and assumptions and important factors that could cause actual risks to differ materially from the expectations of the Issuer’s Directors. No assurance is given that the future results or expectations will be achieved.

The value of investments can go up or down and past performance is not necessarily indicative of future performance. The nominal value of the Bonds will be repayable in full upon maturity, unless the Bonds are previously re-purchased and cancelled.

An investment in the Issuer and the Bonds may not be suitable for all recipients of the Prospectus and prospective investors are urged to consult an independent investment adviser licensed under the Investment Services Act (Cap. 370 of the laws of Malta) as to the suitability or otherwise of an investment in the Bonds before making an investment decision.

The risk factors set out below are a summary of the principal risks associated with an investment in the Issuer and the Bonds – there may be other risks which are not mentioned in this summary.

Key information on the key risks specific to the Issuer:

i. The business activities of the Farsons Group are predominantly concentrated in and aimed at the Maltese market. Accordingly, the Group is highly susceptible to local economic trends and negative economic factors and trends, particularly those influencing consumer demand, may have a negative impact on the business of the Group.

ii. The Group operates in markets which are highly seasonal with higher demand in summer being attributable to hotter temperatures and the increased number of tourist arrivals in Malta. A fall in the number of tourist arrivals in Malta and lower than average summer temperatures may both have a negative impact on the demand for the Group’s products.

iii. The Group’s exports initiative is dependent for its success on the legal, fiscal, cultural and religious norms prevalent in overseas markets. Changes therein may influence the Group’s profitability.

iv. Maintaining the Group’s competitive position depends on its continued ability to offer products that have a strong appeal to consumers.

v. The Group is exposed to substantial competition in all its business segments both locally and overseas and increased competition could lead to downward pressure on the prices of the Group’s products and/or a decline in the Group’s market share.

vi. Raw materials used in the production process of some of the Group’s products are predominantly commodities that are subject to the price volatility on international markets caused by changes in the demand and supply for these products. The Group may be negatively affected by increases in such prices, if it is not able to pass on such prices to the consumer. Similarly, increased utility and personnel costs could have a material negative impact on the results of the Group.

vii. The Group’s growth is in part attributable to the efforts and abilities of the members of its executive management team and other key personnel. Loss, without replacement could have a material adverse effect on the Group’s business, financial condition and results of operations.

viii. The Group’s operational results are also heavily dependent on maintaining good relations with its workforce. A number of the Group’s workforce in various operations is unionised. Any work stoppages or strikes could adversely affect the Group’s ability to operate its businesses.

ix. The Group depends on key pieces of plant, equipment, components and machinery. If any such plant, equipment, component or machinery succumb to breakdown or cease to operate and a replacement is not readily available and/or there are operational difficulties in the supply chain, then the Group’s production and ability to fulfil its contractual commitments would be adversely impacted, thereby having a material negative impact on the Group’s business, financial condition, results of operations and prospects.

x. The Group is dependent on a number of information technology systems for the smooth running of its production lines as well as in its administration. A significant breakdown in these computerised systems may affect the operations of the Group and consequently its profitability.

xi. The Group is highly dependent on its relationship with its distributors and franchisors and this could adversely affect the Issuer’s operating results and growth strategy if it is unable to maintain the existing relationships or replace them with alternative relationships on equally favourable terms.

xii. The Group’s operations are subject to a significant degree of regulation. Changes in the law or regulations governing its products could impact negatively the Group’s financial results. Furthermore, failure to maintain and/or obtain any necessary licences could have a negative impact on the Group’s business and its operational results.

xiii. The Group relies heavily on the reputation of its branded products. An event, or series of events, that materially damage/s the reputation of one or more of the Group’s franchise brands could have an adverse effect on the value of that brand and subsequent revenues from that brand or business.

xiv. Contamination may lead to business interruption, product recalls or liability, each of which could have an adverse effect on the Group’s business, reputation, prospects, financial condition and results of operations.

xv. Companies in the beverage and food sector are occasionally exposed to complaints and/or litigation. If these result in fines or damage to the Group’s reputation, the Group’s business could also be impacted.

xvi. Should the Spin-Off materialise there may be a (i) reduction in the Company’s fixed assets, (ii) change in the nature of the Company’s assets, (iii) loss of income from the Trident Group, (iv) Increase in the Company’s level of financial gearing, and (v) counterparty risks in that the Group will have had to enter into lease agreements with the Trident Group.

xvii. The Group’s activities potentially expose it to a variety of financial risks: market risk, credit risk and liquidity risk.

xviii. The Group is exposed to foreign exchange risk, counterparty risk and interest rate risk.

xix. The Group is exposed to insurance coverage risk in that it may be difficult for the Group to recover losses from insurers and/or the amount recovered may not be sufficient to make good the loss suffered.

Key information on the key risks specific to the Bonds:

An investment in the Bonds involves certain risks, including those set out below in this section. In deciding whether to make an investment in the Bonds, prospective investors are advised to carefully consider, with their own independent financial and other (including tax, accounting, credit, legal and regulatory) professional advisers, the following risk factors (not listed in order of priority) and other investment considerations, together with all the other information contained in the Prospectus:

  • Orderly and Liquid Market

The existence of an orderly and liquid market for the Bonds depends on a number of factors, including, but not limited to, the presence of willing buyers and sellers of the Issuer’s Bonds at any given time. Such factors are dependent upon the individual decisions of investors and the general economic conditions of the market in which the Bonds are traded, over which the Issuer has no control.

Accordingly, there can be no assurance that an active secondary market for the Bonds will develop, or, if it develops, that it will continue. Accordingly, there can be no assurance that an investor will be able to sell or otherwise trade in the Bonds at or above the Bond Issue Price or at all.

  • Subsequent Changes in Interest Rates

The Bonds have a fixed interest rate, accordingly investment in the Bonds involves the risk that subsequent changes in market interest rates may adversely affect the value of the Bonds and their transferability.

  • Currency Risk

Any investor whose currency of reference is not the Euro shall bear the risk of any fluctuations in exchange rates between the currency of denomination of the Bonds (€) and the Bondholder’s currency of reference.

  • Changes in Circumstances

No prediction can be made about the effect which any future public offerings of the Issuer’s securities, or any takeover or merger activity involving the Issuer, will have on the market price of the Bonds prevailing from time to time. If such changes take place, they could have an adverse effect on the market price of the Bonds.

  • Changes to Terms and Conditions

In the event that the Issuer wishes to amend any of the Terms and Conditions of Issue of the Bonds it shall call a meeting of Bondholders in accordance with the provisions of section 6.13 of the Securities Note. These provisions permit defined majorities to bind all Bondholders including Bondholders who did not attend and vote at the relevant meeting and Bondholders who voted in a manner contrary to the majority.

  • Changes in Law

The Terms and Conditions of this Bond Issue are based on Maltese law in effect as at the date of this Prospectus. No assurance can be given as to the impact of any possible judicial decision or change in Maltese law or administrative practice after the date of this Prospectus.

  • Additional Indebtedness and Security

The Issuer may incur further borrowings or indebtedness and may create or permit to subsist security interests upon the whole or any part of its present or future undertakings, assets or revenues (including uncalled capital).

  • Discontinuation of Listing

Even after the Bonds are admitted to trading on the MSE, the Issuer is required to remain in compliance with certain requirements relating inter alia to the free transferability, clearance and settlement of the Bonds in order to remain a listed company in good standing. Moreover, the Listing Authority has the authority to suspend trading or listing of the Bonds if, inter alia, it comes to believe that such a suspension is required for the protection of investors or the integrity or reputation of the market. The Listing Authority may discontinue the listing of the Bonds on the MSE. Any such trading suspensions or listing revocations/discontinuations described above could have a material adverse effect on the liquidity and value of the Bonds.

  • Ranking of Bonds

The Issuer has not granted any security over any of its assets and therefore as security for its obligations under the Bonds. Accordingly, the Issuer’s obligations under the Bonds are unsecured obligations ranking equally with its other present and future unsecured obligations. Furthermore, subject to the negative pledge clause set out in section 6.3 of the Securities Note, third party security interests may be registered which will rank in priority to the Bonds against the assets of the Issuer for so long as such security interests remain in effect.

Disclaimer:

Prospective investors are urged to base any investment decision on all the information contained in the Prospectus. The value of investments may increase as well as decrease and past performance is not an indication of future performance. Prospective investors should consult an independent financial adviser for personal advice with respect to the suitability of the Bonds prior to investing in them.

Download:

Simonds Farsons Cisk plc – Prospectus dated 31 July 2017

Rizzo, Farrugia & Co. (Stockbrokers) Ltd is the Sponsor & Manager to the Simonds Farsons Cisk plc bond issue.

This webpage has been prepared based on the Prospectus dated 31 July 2017 issued by Simonds Farsons Cisk plc and no representations or guarantees are made by Rizzo, Farrugia & Co. (Stockbrokers) Ltd with respect to the accuracy of the data. This webpage is for information purposes only. It is not intended to be and should not be construed as an offer or solicitation to acquire or dispose of any of the securities or issues mentioned herein. Rizzo, Farrugia & Co. (Stockbrokers) Ltd accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this webpage.

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