UPDATE 1-Nyrstar plans combined 600 mln euro rights, debt issues

Mon Sep 1, 2014 7:10am EDT

Related Topics

* To raise 250 mln euros in shares, 350 mln euros debt

* Large capital expenditure in coming years

* Net debt/EBITDA target of 2.5 from 3.1 at end of June

* Shares rise as much as 9.4 pct (Adds shares, analyst comment)

BRUSSELS, Sept 1 (Reuters) - Nyrstar, the world's largest zinc smelter, announced plans to launch a combined rights and debt issue worth a total of 600 million euros ($787.6 million) to fund an increase in investment and reduce its debt, giving a boost to its shares.

The company, which also mines zinc, said in a statement on Monday it would seek a capital increase of 250 million euros, for which existing shareholders would have preferential rights.

It will also offer to institutional investors 350 million euros of senior unsecured notes due in 2019.

Broker Citi said that the plans, if successful, should provide relief to Nyrstar's stretched balance sheet and provide investors comfort about the refinancing of its forthcoming bond maturities.

Nyrstar had said in July it was looking into accessing equity and bond markets.

"What else could they do? The profitability of mining is so low, it wouldn't make sense to dispose of a mine," Bank Degroof analyst Bernard Hanssens said.

"The capital increase will address the problem of financing the huge capital expenditure they have (set) for the coming years."

Nyrstar shares rose as much as 9.4 percent to a one-month high of 3.2250 euros, making them by far the strongest performers on Euronext Brussels.

The shares have recouped some of their value so far this year, after falling as low as around 2 euros in 2013 due to a low zinc price, investor impatience with its mining expansion and trouble at its Finnish supplier Talvivaara. It was a third year of declines in the share price, which peaked at over 10 euros in early 2011 after floating at 20 euros in 2007.

Nyrstar said it would launch a tender to repurchase all 220 million euros of outstanding 2015 bonds and up to 100 million euros of its 515 million euros of outstanding 2016 debt.

The new financing will also fund a 68 million euro contribution to the redevelopment of Port Pirie, an Australian site where Nyrstar is converting a smelter into an advanced metal refining facility.

It will additionally cover 200 million euros of its planned 250 million euros of investments over the next two years to raise the capacity of its smelters and increase their ability to handle more complex and higher value material.

Finally, it will help push Nyrstar's ratio of net debt to core profit (EBITDA) down towards its target of 2.5. The figure was 3.1 times at the end of the first half.

Talvivaara, to which Nyrstar has paid 232 million euros in advance for zinc ore deliveries, last year suspended its mining operations and started a court-led reorganisation to avoid bankruptcy. (1 US dollar = 0.7618 euro) (Reporting By Philip Blenkinsop; editing by Susan Thomas and Jane Baird)

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