Download Report for compliance with the conditions of the bonds loan issue

REPORT
For 1Q 2016 as at 31.03.2016 on the compliance with the terms and conditions of the debenture loan
issue of corporate convertible bonds ISIN Code BG2100003156,
issued by Industrial Holding Bulgaria Plc in 2015
This Report on compliance with the terms and conditions of the debenture loan – issue of corporate convertible
bonds ISIN code BG2100003156 issued by Industrial Holding Bulgaria Plc. /IHB Plc. or the Holding/ includes
information regarding the maintenance of the financial ratio presented with the audited individual report as at
31.03.2016.
1. Compliance with the terms and conditions of issue of convertible bonds 2015
1.1. Convertible bonds listing at Bulgarian Stock Exchange - Sofia AD
On 21.05.2015 the trading of corporate bonds issue 2015 of IHB Plc started at BSE-Sofia AD, bonds segment.
The stock exchange code is 4IDF. The issue amount is BGN 49,999,600.00 and the number of bonds is 499,996
with nominal value of BGN 100 each.
The market batch is one lot equal to 10 bonds. The listing price as of 21.05.2015 is 100% of the nominal value.
The transaction cash settlement is executed in BGN.
1.2. Holding of General Meeting of Bondholders and election of a Representative of the bondholders
On 12.05.2015 the First General Meeting of Bondholders was held and Mrs. Antoaneta Mihailova Dimolarova,
attorney, was elected as a Representative of the bondholders. The Representative will be entitled to a monthly
remuneration of BGN 250 (two hundred and fifty).
1.3. Interest payments
Bondholders registered as such in the Central Depository AD not later than 3 /three/ business days prior to
interest payment date, respectively 5 /five/ business days prior to final interest payment date, which is the final
maturity date of the issue have the right to interest payment.
Nominal interest rate in the current issue of convertible bonds is fixed at annually rate of 6.5 percent over the
life of the loan.
The interest payment period is a 6-month period with fixed dates as follows: 10.10.2015, 10.04.2016,
10.10.2016, 10.04.2017, 10.10.2017 and 10.04.2018.
On 10.10.2015 IHB made the first interest payment and on 10.04.2016 made the second interest payment. The
interest payments are carried out by the Central Depository.
1.4 Conversion ratio and conversion price
With the decision for bond issue 2015, the Managing Board of Industrial Holding Bulgaria has determined the
number of new shares to be converted into one bond when exercising the right of conversion and their price, the
so called conversion ratio and respectively conversion price.
The conversion price is equal to the nominal value of a share divided by the conversion ratio – the price on each
new share is acquired when converting bonds into shares.
The Managing Board of Industrial Holding Bulgaria set a conversion ratio of 100.00 shares for each bond with
a nominal value of BGN 100 which defines conversion price of BGN 1.00;
Under the terms and conditions of the debenture loan it is possible to adjust the conversion ratio and conversion
price when certain events occur – for example issue of new shares (capital increase of Industrial Holding
Bulgaria through cash), issue of new incremental shares (capital increase of Industrial Holding Bulgaria by
Report for 1Q 2016 as at 31.13.2016 on the compliance with the terms and conditions of the debenture loan
issue of corporate convertible bonds ISIN Code BG2100003156, issued by IHB in 2015
converting profit into capital), payment of dividends, reduction of capital. The issuer will notify the bondholders
in due time in the same manner that it discloses information to the Financial Supervision Commission,
Bulgarian Stock Exchange, Central Depository and the public.
2. Utilization of the debenture loan funds in 2015
As specified in the Prospectus, the Holding intends to use the funds raised through the issue to reimburse the
debenture loan under a previous issue of convertible bonds - ISIN BG BG2100006134, issued by Industrial
Holding Bulgaria Plc and financing other projects of subsidiaries:
Utilisation of funds
№
Utilization
Amount (BGN)
Note
29 999 800
Issue of convertible bonds ISIN code BG ISIN BG
2100006134
"Odesos PBM" АD
"Bulport Logistics'AD
7 500 000
Financing of investments - second installment for
the purchase of shares of the companies
3
"Odesos PBM" АD
"Bulport Logistics' AD
6 700 000
Refinancing of investment to purchase shares of
the company
4
"Bulyard" АD
5
"Dockyard Port Burgas" АД
6
Othter
1
Repayment of debenture loan
2
TOTAL
Refinancing of investment to purchase shares of
the company
Refinancing of investment - the third stage of the
3 316 000
cereal sector
780 000
1 643 764 Other projects of subsidiaries
49 939 564
Source: "Industrial Holdin Bulgaria"АD
Investment costs are approximate
On 9.04.2015 the public offering was successfully closed and on 20.04.2013 the Trade Registry published
announcement for opening of new debenture loan. The amount received from the subscribed and paid
convertible bonds is BGN 49,999,600.00. The net amount of proceeds from the public offering after deducting
the expenses of the Issuer, paid commissions, fees, etc.. expenses, including fees paid to the FSC amount to
BGN 49,947,500.
As stated in the Prospectus, the principal amount of funds raised from the bond issue in 2015 is intended for
early repayment of the loan under the previous issue of convertible bonds ISIN code BG2100006134 issued by
IHB in 2013.
Results of the procedure for allowing holders of convertible bonds issued by Industrial Holding Bulgaria issue
ISIN code BG2100006134, to convert their bonds into shares as follows:
 Completion date for submission of applications for conversion of the bonds - 03.04.2015;
 Number bondholders expressed their wish to convert bonds into shares - 9 /nine/.
 Total number of bonds for conversion into shares - 94 221 /ninety four thousand two hundred twenty
one/ with a nominal value of BGN 100 /one hundred/ each;
 Total number of shares subscribed for convertible bonds - 9 422 100 /nine million four hundred and
twenty two thousand one hundred/;
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Report for 1Q 2016 as at 31.13.2016 on the compliance with the terms and conditions of the debenture loan
issue of corporate convertible bonds ISIN Code BG2100003156, issued by IHB in 2015

The issuer and the investment intermediary have not encountered difficulties; there were no disputes
in converting bonds and subscription for shares.
With decision as of 16.04.2015 г. the Registry Agency registered in the Trade Register increase of the capital
of Industrial Holding Bulgaria PLC from BGN 67 978 543 to BGN 77 400 643 by the issue of new 9 422 100
ordinary, dematerialized, registered, freely transferable shares giving right for 1 vote in the General meeting
of shareholders, with a nominal value BGN 1 each, issued due to the conversion of 94 221 registered
dematerialized convertible bonds ISIN code BG2100006134 into shares.
On 20.04.2015 was made the fourth interest payment and principal payment on convertible bonds from 2013.
Right of payment of principal had bondholders registered as such in the Central Depository as at 09.04.2015
who have not exercised their right to convert the bonds they hold in the corresponding number of shares of IHB
in that period. The principal payment was BGN 20,577,700 with which IHB obligations on debenture loan bond
issue 2013 were repaid.
The remaining funds will be used by IHB management to refinance and finance investment projects with the
main objective of consolidating its portfolio in construction and repair of ships and port activity.
With funds from the new issue were refinanced USD 4,250 thousand for the first installment for the purchase of
shares in ports Odessos PBM and Bulport logistics, as well as USD 500 thousand to refinance transaction for
the acquisition of shares in Bulyard AD, Sofia at the end of 2014.
In order to reduce the negative impact of the high levels and fluctuations of the dollar on the amount of total
interest-bearing debt of the group and reduce interest expenses, management has taken measures to further early
repayment of part of the obligations of its subsidiaries to banks and related parties.At the expense of funds
raised from the new issue, in April was repaid bank loans amounting to USD 4.899 thousand and USD 1,237
thousand to related parties and bank loans in BGN and Euro respectively BGN 5.849 thousand and BGN 9.025
thousand the effect of which will occur in subsequent periods:




Bulyard repaid BGN 2,557 from the revolving credit line for working capital; repaid early and in
full secured bank credit for working capital; the remaining balance of BGN 3,324 thousand was
repaid early;
Privat Engineering repaid early and in full secured investment credit of BGN 7,078 thousand
(USD 3,893 thousand ) following early repayment of USD 5,153 thousand in January;
Tirista Ltd repaid early USD 1,132 thousand principal payment, due by the end of 2015, from
secure bank credit, the amount is reduced to USD 3,852 thousand with maturity date in 2017;
BGN 11,224 thousand were repaid from loans to related parties
With the funds from the new bond issue IHB made paid USD 1 mln from the second instalment for the
purchase of shares in Odessos PBM.
In view of the trends and uncertainties regarding the development of enterprises from various industries, IHB
management reserves the right to restructure the investment intentions within the group in accordance with the
change in priorities. For example, refinancing of construction and expansion of the cereal sector of Dockyard
Port Bourgas AD will be carried out in stages in order to shift the time of the administrative procedure. With
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Report for 1Q 2016 as at 31.13.2016 on the compliance with the terms and conditions of the debenture loan
issue of corporate convertible bonds ISIN Code BG2100003156, issued by IHB in 2015
funds from the new issue are currently refinanced BGN 500 thousand investment costs of the company in the
implementation of the third stage of the cereal sector.
In the following years the group can allow new capital costs for financing of new development or ongoing
projects of IHB and its subsidiaries, including the expansion of the port terminal in Bourgas, contracts for the
purchase of ships, investment in priority projects and others. Financing of investment projects is carried out in
order of their occurrence in time. Ongoing projects are funded and implemented with priority. Some of the
projects are funded with funds raised through the bond issue and own funds depending on the needs and
available cash at the specific time. IHB is ready to meet the financial needs of ongoing projects through bank
loans and leasing. If necessary, the Holding will continue to fund the current development of the companies.
There are existing possibilities for capital expenditures for new acquisitions and business expansion. Decisions
on the amount and sources of the necessary funds will be taken individually for each case.
As at the moment of this report IHB has utilised the funds raised under bond ISIN code BG 2100003156.
3. Maintenance of financial ratios as at 31.03.2016
In compliance with IAS, as at 31 December 2015 separate hybrid component related to the conversion option
is separated from the new bond issue is. The analysis was performed for the prevailing market rate for similar
debt of issuers with similar risk profiles without conversion options, on which is calculated the liability
component of the bonds based on the present value of cash flows. The rest of the issue is reflected as a
component of equity. Respective disclosures in the financial statements were made.
The classification does not affect the calculation of financial ratios, which IHB has assumed as an obligation
to maintain in the period to repay the debenture loan, ie the entire bond issue is recognized as a liability.
All calculations have been made on an individual basis.
2012
2013
2014
2015
Interest coverage ratio
23%
4.9
18%
7.5
24%
1.4
26%
4.7
2015 – 2018
forcast
≤ 65%
≥ 1.2
Interest-bearing debt/assets ratio
13%
18%
23%
26%
≤ 50%
Financial ratios
(on a individual basis)
Liabilities/assets ratio
1Q 2016
26%
6.2
25%
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Report for 1Q 2016 as at 31.13.2016 on the compliance with the terms and conditions of the debenture loan
issue of corporate convertible bonds ISIN Code BG2100003156, issued by IHB in 2015
Liabilities/assets ratio
Liabilities/assets ratio is calculated by dividing the total short-term and long-term borrowed funds by the total
assets as per the balance sheet as at a particular date. IHB has undertaken to maintain its liabilities/assets
ratio not higher than 65%. The interest-bearing debt/assets ratio as at 31.03.2016 is 26%.
Interest coverage ratio
The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of
one period by the company's interest expenses of the same period. IHB has undertaken to maintain its
interest coverage ratio not lower than 1.2%. The interest coverage ratio for the first nine months is 6.2.
Interest-bearing debt/assets ratio
Interest-bearing debt/assets ratio is calculated by dividing the total short-term and long-term interest payables
by the total assets as per the balance sheet as at a particular date. IHB has undertaken to maintain its interestbearing debt/assets ratio within the limit of 50%. The interest-bearing debt/assets ratio as at 31.03.2016
is 25%.
This report was approved with decision of the Supervisory and Managing boards of Industrial Holding Bulgaria
as of 28.04.2016
Daneta Zheleva,
CEO of Industrial Holding Bulgaria PLC
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