Global player in the BNPL (buy-now-pay-later) market Zip Co [ASX:ZIP] launched a $25 million equity yesterday morning, brought in to bolster its broader restructuring of liabilities.
Today, ZIP said it has completed the equity placement with success and has reduced its corporate debt in the process.
ZIP shares have been largely flat in the year so far and in the past week and month. However, after the heavy discounting, the BNPL stock has suffered a 20% and 22% drop in the past full year — and on wider markets — respectively especially considering some broader pressure in the fintech sector:
Source: TradingView
Zip stashes $25 million for debt wiggle room
Yesterday, ZIP chose to launch a $25 million ($24.7 million) equity raise in order to help the broader restructuring of its current liabilities.
The group chose to raise this equity amount at 47 cents a share — a 6.9% discount to the last closing price of 50.5 cents on 7 June — courtesy of Goldman Sachs Australia who acted as dealer manager.
Zip also announced it would be restructuring existing convertible notes at 47.5 cents, dropping its owed $330 million into convertible notes to more like $137.8 million.
The BNPL company said it has completed the equity placement with success and has reduced its corporate debt in the process.
Zip said it had received strong interest in the placement from both domestic and offshore institutional investors.
Shares from the placement will rank equally with existing shares on issue and settlement is slated for 14 June.
With that all over and done with, Zip can now resume its normal trading on the ASX as of today.
Zip Co’s Founder and Global CEO, Peter Gray said:
‘We are very pleased to announce the successful completion of the Equity Placement, the first leg of our liability management exercise.
‘The placement will be used to fund the retirement of $39.8 million of our convertible notes at a very significant discount to face value.
‘Along with the Consent Solicitation process, this exercise will reduce our corporate debt by $192.2 million, further strengthening the balance sheet and positioning the Company for our next phase of growth.’
Zip will be using the equity capital to fund its Cash Incentive Price under the Conversion Invitation, the Early Bird Fee and the transaction costs involved.
With the conversion Invitation and Consent Solicitation process completed, the group expects to reduce its corporate debt and increase the number of shares on issue by 55.8 million.
Ultimately, ZIP believes the move will bring it into a cash-neutral territory, making it high-value accretive for its shareholders.
In the end, Zip will have its core focus on financial services based in Australia, NZ and the US.
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Regards,
Mahlia Stewart
For Money Morning
