Merkanti Holding plc on Friday announced that it intends to propose changes to an existing secured bond issue that is due to mature in 2026, with a view to extending its maturity date and increasing the interest rate.

Merkanti Holding is the holding and finance company of Merkanti Group, comprised of the activities of Merkanti Bank Ltd, a regulated bank, as well as Merkanti (A) International Ltd and Merkanti (D) International Ltd, two industrial real estate companies in Germany.

In a market update, the company stated that during an upcoming bondholders meeting, set to be held in or around July 2024, it will be proposing a number of changes to a bond issue that had first been issued in 2019. This is being done with a view to “extend bondholders’ ability to participate in the company” at an interest rate reflective of the current climate, while also maintaining its balance sheet diversification through what Merkanti Holding described as a “fiscally responsible transaction.”

The bonds were first issued on 18th July 2019 with an outstanding principal amount of €25 million.

According to the proposed amendments, the interest rate of the bonds will be increased from four per cent to 5.7 per cent in a bid to reflect the current interest rate environment.

Additionally, the maturity date of the bonds, originally set for 2026, will be extended by a further seven years to 2033.

“The proposed amendments will have no impact on the security package underlying the bonds, including existing pledges and German law mortgages, with the bonds to remain fully secured throughout the proposed extended term of the bonds,” Merkanti Holding clarified.

In addition to this, should the proposed amendments be approved, Merkanti Holding also stated that it will be providing each bondholder with a bonus payment equivalent to 0.8 per cent of the nominal value of the bonds held by each bondholder. This one-time bonus payment is expected to be paid on 12th August 2024 to all bondholders, together with accrued interest due for the immediately preceding interest period. Therefore, should a bondholder hold €10,000 of bonds, their bonus payment will amount to €80.

Merkanti Holding stated that the bondholders who do not wish to retain their bonds following the amendments will have the ability to sell their bonds on the market at any time prior to or after the bondholders’ meeting. Additionally, any bondholders who vote against the proposed amendments will have the ability to sell their bonds at a price which is yet to be determined, should the amendments be approved.

The company added that additional information on the proposed amendments will be published and sent to bondholders in due course. Since the announcement, Merkanti Holding has also released a presentation to further explain the changes.

Last month, the company announced its financial results for the year ended 31st December 2023, in which it reported €3 million in net interest income (2022: €1.7 million), while pre-tax profit remained stable from year to year at €2.1 million at group level. Its total assets as at the end of 2023 amounted to €109.6 million.