April 16, 2013, 21:10 / Business

Acron refuses to issue convertible bonds

Acron is not yet considering the idea of issuing bonds convertible into Uralkali shares it owns, and hopes to sell a 2.88% stake in the potash company at the market price in 2013-2014, Acron's financial director Alexey said during a telephone conference Milenkov. At the same time, half of the stake can be sold in 2013, half in 2014. Acron’s annual report notes that as of December 31, 2012, the market value of this stake in Uralkali was 19.857 billion rubles. ($654 billion), which is 1.2% higher than the value of the package as of the end of 2011.

Acron plans to use the profit from the sale of Uralkali shares, among other things, to finance the investment program and pay dividends, Milenkov said.

The intention to issue bonds convertible into Uralkali shares owned by Acron was announced in February by the Chairman of the Board of Directors of Acron, Alexander Popov. Acron received a share in Uralkali in 2011 after the former merged with Silvinit, 8.1% of the capital of which belonged to Acron.

As Popov reported then, the issue of bonds would raise an amount that was approximately 30% higher than the market value of Uralkali’s securities. The capitalization of Uralkali at 20.30 Moscow time was $21.2 billion. 2.88% of its shares were worth $609.6 million. It turns out, according to Popov’s logic, Acron could raise about $792.5 million for this stake.

The securities can be converted into shares of Uralkali upon the occurrence of certain conditions, Popov said. Otherwise, Akron will keep its stake, but will enjoy cheap money for a certain time, he added.

The decision to issue securities could be made in 2014: then Acron will need funds for the construction of an ammonia production plant with a capacity of 700,000 tons in Veliky Novgorod, the development of apatite-nepheline ore deposits Oleniy Ruchey and Partomchorr in the Murmansk region and the development of the Talitsky section of the Verkhnekamsk deposit potassium-magnesium salts in the Perm region.

The decision to abandon the issue of bonds is quite logical, says Raiffeisenbank analyst Konstantin Yuminov. This was a fallback option for Acron in case the price of Uralkali shares remained at a low level, he says. Since the potash market situation is improving and Uralkali’s quotes will rise, it will be easier for Acron both from a legal and tax point of view to directly sell the stake, he says.