Mota-Engil SGPS SA, Portugal’s biggest construction company, may sell as much as 80 million euros ($105 million) in convertible bonds this year to take advantage of growing investor appetite for the securities.
“There is a plan to sell international convertible bonds,” said Jose Sampaio de Freitas, 34, who was appointed chief financial officer on Jan. 7. “If market conditions allow us, we could carry out a sale this year.”
Mota-Engil joins a trend among European companies for convertible bond sales as a rally in stock markets pushes equity prices toward all-time highs. Convertible debt offers cheaper funding than traditional bonds because investors sacrifice interest for the right to swap the securities for equity.
Companies including Air France-KLM Group, Europe’s largest airline, Eni SpA, Italy’s biggest oil company, and Spanish hotelier Melia Hotels International SA, raised $10.1 billion from the sale of these bonds in the first quarter, according to data compiled by Bloomberg. It’s the biggest first-quarter amount since the first three months of 1999 when Bloomberg began compiling records.
Mota-Engil, an Oporto-based company with operations in more than 20 countries, sold in March a 175 million euro note due 2016 to individual investors, more than double its original target. The stock has risen 21 percent this year, the third best performer in Lisbon’s PSI20 Index. It traded 0.6 percent lower at 1.88 euros at 10:29 a.m. in the Portuguese capital.
“The goal is to continue to extend our debt maturities and diversify our sources of financing,” said Freitas. Mota-Engil’s net debt fell to 850 million euros in 2012 from 866 million euros a year earlier, the company said in a regulatory filing on March 20.
Mota-Engil is also looking to raise money from the sale of non-core assets, said Freitas, declining to give details.
Freitas said he was “confident” Mota-Engil will win several contracts in Africa as it bids for a total of $5 billion in projects on the continent. Work on some of these deals may only begin in 2014, he said.
Mota-Engil forecast in March that its order book this year will exceed 3.5 billion euros as it seeks to increase its presence in Mozambique and enter new markets in Africa including Zambia, Ghana, Uganda and Kenya.
“We are studying some possible projects in Mozambique.” Freitas said. “We believe Mozambique has great potential because it is rich in minerals and gas and the country has to develop the proper infrastructures to transport its minerals.”
Mota-Engil is building a stretch of a railway line in Malawi for Brazilian mining company Vale SA that links Mozambique’s western province of Tete to the country’s northern port of Nacala. The partnership with Vale may lead to other projects “elsewhere,” Freitas said.