The Management Board of KRUK S.A. of Wrocław (the “Issuer” or the “Company”) hereby reports that, acting pursuant to Art. 371.1–371.3 of the Commercial Companies Code dated September 15th 2000, in conjunction with Art. 2.1 and Art. 9.3 of the Bond Act of June 29th 1995 (the “Bond Act”) and under the authority granted by the Company Supervisory Board in its Resolution No. 56/2012 (the “Supervisory Board's Resolution”), on November 30th 2012 the Management Board adopted Resolution No. 47/2012 (the “Resolution”) to issue unsecured bonds and Resolution No. 49/2012 to determine the interest rate applicable to those bonds.
The issue proceeds will be used to finance the acquisition of debt portfolios by the KRUK Group companies or to refinance the Company's debt.
Pursuant to the Resolution, as part of the Unsecured Bond Issue Programme adopted in the Supervisory Board's Resolutions, KRUK S.A. resolves to issue up to 20,000 Series P1 unsecured bearer bonds, with a par value of PLN 1,000 per bond, maturing 48 months after the Issue Date, understood as the bond allotment date (the “Bonds”).
The par value of the Bonds will be PLN 1,000 per Bond. The Bonds will be offered at the issue price equal to their par value. The Bonds will bear interest (the “Interest”) at the rate equal to 3M WIBOR plus a fixed margin of 460 basis points (the “Margin”). However, if the Debt Ratio exceeds 2.2, the Issuer will be obliged to increase the Margin by 50 basis points per annum, starting from the Interest Period directly following the Interest Period in which the fact of exceeding the 2.2 level of the Debt Ratio is verified based on the consolidated quarterly financial statements of the KRUK Group. The Margin thus increased by 50 basis points per annum will be reduced to its pre-increase value if the Debt Ratio falls to 2.2 or less, starting from the Interest Period directly following the Interest Period in which the fall of the Debt Ratio to or below the 2.2 level is verified based on the consolidated quarterly financial statements of the KRUK Group. The Interest will be paid out every three months. The Bonds will be issued under the Polish law and all legal relations under the Bonds will be governed by the Polish law. The Bonds will be offered to no more than 99 investors under Art. 9.3 of the Bond Act.
The persons eligible to participate in the offering and to acquire the Bonds will be only those persons who have been selected by the Issuer and who have received the invitation to participate in the offering. The Bonds are not and will not be offered under the Issuer's public offering, nor will the Issuer seek their admission to trading on a regulated market. The Issuer intends to seek admission of the Bonds to trading in an alternative trading system.
The issue of the Bonds will be carried out by June 30th 2013.
The Bonds be in uncertificated form, within the meaning of Art.5a of the Bond Act. They will exist in book-entry form as defined in Art. 5 of the Act on Trading in Financial Instruments. The Issuer will seek admission of the Bonds to trading in the alternative trading system on the Catalyst market, operated by the Warsaw Stock Exchange (“Catalyst Alternative Trading System”). The Issuer will take steps to convert the Bonds into book-entry form, register them with the depository-settlement system of the Polish National Depository for Securities (“the Polish NDS”), and introduce them to trading in the Catalyst Alternative Trading System.
The Polish NDS will carry out all activities related to the registration, conversion into book-entry form and exercise of rights attached to the Bonds, pursuant to the agreement concluded with the Issuer. The Rules of the Polish NDS and Detailed Rules of the Polish NDS will apply in this respect. Cash payments under rights attached to the Bonds will be made by the Issuer.
All investors placing subscription orders for the Bonds will agree to the Company’s Management Board taking steps after the Bond issue date to introduce the Bonds to trading in the Catalyst Alternative Trading System, including in particular:
a. introducing and listing of the Bonds in the Catalyst Alternative Trading System,
b. taking any factual or legal actions necessary to introduce the Bonds to trading and list them in the Catalyst Alternative Trading System.
The Bonds will be redeemed against cash payments, at nominal value. The Bonds confer the right to cash payments only. Transferability of rights attached to the Bonds will not be restricted in any way. The Bonds will be unsecured.
The Issuer intends to assimilate Series P1 Bonds with Series O2 Bonds after the end of the first Interest Period.
The Management Board of KRUK S.A. reports that as at the last day of the quarter directly preceding the offer to acquire the Bonds, i.e. September 30th 2012, the Issuer had the following financial liabilities:
- bank loans of PLN 154m,
- liabilities under bonds in issue – PLN 363m, and
- liabilities under lease agreements – PLN 6m.
The growth prospects for the debt market, in particular the anticipated large supply of debt collection cases from the banking sector in the coming years, will present the Issuer and the Group with an opportunity to purchase large debt portfolios. The Issuer expects the KRUK Group to make significant investments in debt portfolios during this period. In line with its current practice, the KRUK Group will finance the investments with its own funds generated across all operating segments, including in particular funds generated by the purchased debt portfolios and collection services, and with debt capital, in particular bank loans and bonds issued by the Issuer. The total amount of financial debt the Company expects to incur in relation to the investments will depend on several factors, including:
- the size, type and price of portfolios available on the debt market,
- behaviour of the KRUK Group’s competitors and their financial resources,
- access to financing, in particular debt financing, and terms of financing obtained by the KRUK Group, and
- the amount of own funds the Group will intend to use for investments.
Considering the above circumstances, the Management Board assumes that the debt level of the KRUK Group, including the Company, may continue to grow until all the bonds are redeemed and over the coming years.
Notwithstanding the nominal value of the debt, the Management Board undertakes to maintain, until the redemption date of the Bonds, the Debt Ratio for the KRUK Group at a level not higher than 2.5. The Debt Ratio was defined in the Terms and Conditions of the Bonds as the ratio of net financial debt to equity, where: (i) net financial debt means the value of the Group's financial liabilities less cash; (ii) equity means the equity of the KRUK Group;
Financial liabilities mean the sum of financial liabilities under bonds or other debt securities similar to bonds, as well as under bank and other loans, finance leases, promissory notes, guarantees or sureties issued (guarantees or sureties issued to entities outside the KRUK Group), accession to debt or assumption of liabilities or liabilities under derivative transactions.
The Debt Ratio will be determined on the basis of IFRS-compliant consolidated financial statements of the KRUK Group prepared as at the end of each calendar quarter.
The Company's declaration to maintain the Debt Ratio at the specified level represents a guarantee to investors that the Company will be making controlled decisions on incurring financial obligations by the Group, including by the Company. The Company does not envisage any problems regarding its ability to meet liabilities under the unsecured bonds.
In addition, the Company undertakes that in the circumstances specified in the Information Memorandum, including a situation where the Company shares are delisted from the Warsaw Stock Exchange, the Debt Ratio exceeds 2.5, the Company files a petition in bankruptcy with the court, or the Company is declared bankrupt by the court, the Company will repurchase the Bonds early at the option of a Bondholder, with the Bondholders having the right to demand such mandatory early redemption within 100 days from the occurrence of any such event.
The intended effect of the project consisting in raising funds to purchase debt portfolios by companies of the KRUK Group, to be financed with the proceeds from the issue of the unsecured bonds, will be comparable with the effect of similar projects carried out by the Company to date.