BARRIE, Ontario – Student Transportation Inc. (TSX: STB) this week announced it has received the first exercise notices from note holders to convert unsecured convertible debentures to common shares reducing the company’s debt by $1.8 million. The initial $45 million debentures were offered on Oct. 26, 2009 and bear an effective interest rate of 7.5 per cent. They are convertible at $5.15 per share and mature on Oct. 31, 2014.
“With a conversion price of $5.15 per common share, these note holders will see a significant dividend yield of approximately 10 per cent,” said Denis J Gallagher, chief executive officer. “These conversions signal investor confidence in our consistent dividend, our stable long-term contracts, and our strategic plan for continued growth. I believe investors who look at a total return calculation will recognize that the ‘eligible dividend’ has more favourable tax treatment than interest. Since the debenture offering, our common share price has increased to a high of $6.16 earlier this month from $4.58. In addition, three new accretive acquisition Letters of Intent, announced this month, add to the security of the cash flows and the dividend. We fully expect to receive additional exercise notices.”
Gallagher also said the company continues to prepare for a dual listing of its common shares on the NASDAQ.
“U.S. investors are looking for companies with simple business plans and stable dividends. Our main listing will continue to be on the TSX where we have had great access to the capital markets. I will be asking the Board to approve targeting a late Spring 2011 listing on the NASDAQ or at the beginning of July, which is the start of our new fiscal year at the latest. The U.S. listing creates access to a larger shareholder base and allows U.S. institutional and retail investors to trade shares more easily and with greater liquidity,” he said.
