Friday, January 25, 2013

Leisure and Resorts World Corporation (LR) Set to Issue 8.5% Coupon Preferred Shares


Leisure and Resorts World Corporation, a listed games operator in the Philippines, announced its plan to raise 1.75 billion pesos through a preferred share issuance. Proceeds of the issue will be used to finance the following projects:

1. Belle Grande Integrated Resort and Casino
2. Midas Hotel and Casino
3. Techzone project
4. Acquisition and roll-out of additional bingo sites

The perpetual preferred shares will have a par value of 1 peso per share, a coupon rate of 8.5% per annum, paid semi-annually, and are cumulative, non-voting and non-participating.

Here are what these features mean:
  1. Perpetual - the issuer (in this case, LR) has no obligation to buy back the shares from investors. Instead, shareholders can buy and sell shares in the stock exchange after the issue.
  2. Coupon rate - the percentage of the par value (or the amount investors pay when they buy shares at issue) that is paid out to investors every year. With this issue, dividend payments will be made every six months, at 8.5%/2 = 4.25% of par per payment.
  3. Cumulative - the firm cannot issue common dividends until all accumulated unpaid preferred dividends. Yes, firms can choose not to pay preferred stock dividends in any given year.
  4. Non-voting - preferred stockholders do not have voting rights
  5. Non-participating - if the company goes bankrupt, preferred stockholders are entitled to, at most, their initial investment plus any unpaid dividends
The issue also comes with 1 warrants for every 20 preferred shares. The warrants have an exercise price of 15 pesos and exercise date of 5 years from issue. A warrant gives the holder the right to buy the issuer's common stock at the exercise price any time after the exercise date.

You can download the actual press release here.

Some helpful info about LR from Bloomberg here.

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