In a statement released on the Zagreb Stock Exchange yesterday, Atlantic Grupa announced that they are considering the issuance of new bonds.

In their statement the company did not specify on how much the new issuance might be, but they did note that more information will be released in case the transaction is executed.

However, it is not hard to imagine that the new issuance will be used to refinance the company’s HRK 200m bond which matures in June 2021. The bond was issued back in June 2016 at 3.135% yield with an annual coupon of 3.125% and a semi-annual payment of interest. This would translate to an annual interest expense of HRK 6.4m. At issuance synthetic government yield was 2.635% and bond was issued with 50 bps spread. Considering the current low interest environment it wouldn’t surprise us if Atlantic was able to reach an even lower rate this time, especially when considering that the company is currently operating on the lowest level of indebtedness since the acquisition of Droga Kolinska. One should also add that Atlantic Grupa would certainly be able to pay off the maturing bond with cash held on the balance sheet, but it seems as the company does not want to significantly lower their cash position at the moment. This could imply that the company is looking to collect funds in case any interesting target comes along as it is always looking to increases its growth via acquisition. Also, the company might be looking to improve its capital structure by increasing debt.

Currently, Atlantic Grupa holds a net debt of HRK 756m, which translates to a net debt/EBITDA of 1.1x. Please refer to the chart below to see Atlantic Grupa’s net debt development since 2015.

Atlantic Grupa Historic Net Debt (HRK 000) & Net Debt/EBITDA