MGI issues new bonds and repurchases existing ones

MGI announced Thursday evening that they have successfully placed EUR 225 million of new senior secured floating rate bonds. The new bonds have a term of four years (March 2027) and carry a floating rate coupon of 3 months EURIBOR plus 7.25% per annum.

In conjunction with the sale of the new bonds MGI repurchased EUR 176.2 million of their outstanding senior secured callable floating rate bonds that mature on 27 November 2024 (“2024-bonds”). The 2024-bonds have an interest rate of EURIBOR (3m) + 5.75%.

The net effect of these transactions is an increase of EUR 48.8 million in interest-bearing debt and about the same in cash. According to MGI, their pro forma net debt was EUR 256 million after the sale of the Enad Global 7 shares. With the net increase of yesterday’s bond sale, MGI’s interest-bearing debt would increase to EUR 470 million and their cash position to approximately EUR 212 million, giving the company a net debt position of EUR 258 million. MGI’s net debt to Adj.EBITDA (2022) ratio would be 2.8x, which is within the company’s target range of 2.0 - 3.0x.

According to MGI this transaction was done to diversify MGI’s bond maturities. The company also stated that they plan to further decrease leverage through additional repurchases of the 2024-Bonds and/or redeeming the 2024-bonds in full once the redemption premium has decreased.

Our assessment of the transaction is perhaps best described as neutral. With interest rates expected to continue to rise it makes sense to get ahead of the situation and refinance some of the debt now. On the other hand, the 2024 bonds still have 20 months left to maturity and refinancing it with more expensive debt naturally means higher financial expenses. The weighted average total interest rate on MGI’s outstanding bonds increased from 8.91% to 9.62% (EURIBOR 3M: 2.94%). MGI’s cash position is now very strong and if they conduct additional repurchases as they indicated, the total interest expenses might not be as high as would first appear. We will update our estimates at the latest at the end of May in conjunction with the release of the Q1’23 report.