F&N woos bondholders with higher buyout offer

Will they finally give in?

According to OSK, F&N has raised its buyout offer to remaining bondholders as it seeks certain concessions ahead of a business restructuring involving a spinoff of its property division.

For the $108.25 million of 5.5 per cent notes due 2016, it raised its offer to redeem the bonds at par plus 6.5 per cent and accrued interest, from its earlier offer of par plus 2.75 per cent and accrued interest.

Here's more:

For the $200 million of 6 per cent notes due 2019, it raised its early redemption offer to par plus 9 per cent and accrued interest, from par plus 3 per cent and accrued interest.

Noteholders who accept the proposals before the business close of Dec 16 will receive an additional early-bird fee of 50 basis points, and a bondholders' meeting to vote on the proposals will take place on Dec 23.

The sweetened offer is likely to get the buy-in of remaining bondholders, in our view, enabling the company to avoid a strategic default and clearing the coast for the listing of its property division, Fraser Centerpoint Limited (FCL). The demerger will be carried out by way of a 2-for-1 free distribution of FCL to its shareholders.

We see F&N as a restructuring play with prospects of narrowing its NAV discount with the spinoff of its property division, with additional drivers from synergies derived with ThaiBev and TCC Assets on the F&B and property fronts, respectively. Our SOTP valuation of $6.70/share, based on a valuation of SGD3.83 for FCL (pegged to 25% discount to RNAV) and SGD2.86 for the beverage and non- property business, offers 17% upside from current levels .