Pan Brothers to issue bonds for $200m
Publicly listed garment manufacturer Pan Brothers (PBRX) plans to conduct its first global bond issuance worth US$200 million to refinance its debt and fund its expansion.
The five-year global bonds will be listed on the Singapore Stock Exchange (SGX). The company, however, has not yet made a final decision on the debt paper’s coupon rate or issuance schedule.
Pan Brothers is upbeat that the debt paper sale will receive a warm welcome, even though the coupon rate will not exceed 10 percent.
“We’ve agreed that the coupon will not be higher than 10 percent. At the moment, the market already absorbs [a coupon rate of] 7 percent,” Pan Brothers corporate secretary Iswar Deni said on the sidelines of an extraordinary general shareholders’ meeting on Thursday.
Around 80 percent of the proceeds from the sale will be used to refinance part of the company’s debt, which amounts to $270 million.
The debt consists of $40 million-worth of term loans that will mature in October 2018 and $230 million-worth of revolving loans that will be due in October 2019.
As of June, Pan Brothers has used more than $206 million of the loans to refinance its 2013 debt and to strengthen its capital structure.
Meanwhile, the other 20 percent of the proceeds from the bond issuance will be used for capital expenditure and working capital.
Iswar said it would build two more factories through subsidiary Eco Smart Garment Indonesia in Central Java next year. Eco Smart Garment already has four factories in Boyolali, Central Java, and in Bandung, West Java.
The new factories are expected to begin operations in the last quarter of 2017 and help increase Pan Brothers’ annual production volume to at least 100 million clothing articles. Pan Brothers’ annual production volume currently stands at 90 million clothing articles.
“We also target sales to increase 10 to 20 percent by 2017,” Iswar said.
The company manufactures garments under several popular brands, including Adidas, Calvin Klein, Lacoste and Macy’s. In addition to apparel, it also produces sewing thread, embroidery thread and knitted fabric.
Most of its products are exported, such as to the US, Europe and other Asian countries. Asia is its largest market, accounting for almost half of its sales, followed by the US, Europe and other markets.
It announced plans to set up factories in Vietnam and Cambodia in 2014 as part of its global expansion, but has not realized them as it has yet to find the right local partners to run the factories.
Its latest financial report shows that Pan Brothers booked a 17.7 percent annual rise in sales to $372.36 million in the first nine months of this year. Its net profit almost doubled to $12.81 million from the January-September 2015 period.
The company had $490.8 million-worth of assets at the end of September. Its shares ended at Rp 446 (3 US cents) apiece on the Indonesian Stock Exchange (IDX) on Thursday, down 1.3 percent from the previous day. (wnd)
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