Unsecured Convertible Notes Add Risk Amid NEXION’s Pending Acquisition
NEXION Group Ltd has issued 700,000 convertible notes to raise $70,000, supporting costs for a proposed acquisition. The notes carry a 10% interest rate and may convert to shares pending shareholder approval.
- Issued 700,000 unsecured convertible notes at $0.10 each
- Raised $70,000 to fund proposed acquisition costs
- Total convertible notes on issue now 15.8 million
- Notes mature 31 May 2026 with 10% annual interest
- Conversion to shares and options subject to shareholder approval and acquisition outcome
Convertible Notes Issuance to Support Acquisition
NEXION Group Ltd (ASX, NNG), a technology company specialising in hybrid-cloud infrastructure and data centre services, has announced the issuance of 700,000 convertible notes at $0.10 each, raising $70,000. This latest tranche increases the total convertible notes on issue to 15.8 million, reflecting the company's ongoing strategy to secure flexible funding ahead of a significant acquisition.
Terms and Conditions of the Notes
The convertible notes mature on 31 May 2026 and carry an attractive 10% per annum interest rate, payable either at maturity, upon conversion, or if repaid early at NEXION's discretion. Importantly, these notes are unsecured, which means they are not backed by specific company assets, a factor investors will weigh when assessing risk.
Conversion Mechanics and Shareholder Approval
Noteholders have the option to convert their notes into fully paid ordinary shares at a conversion price of $0.10 per share, along with free-attaching options exercisable at $0.001 each, expiring 30 June 2026. However, conversion is contingent on several conditions, shareholder approval for issuing the conversion securities, no objection from the ASX, and either confirmation that the proposed acquisition will not proceed or failure of the acquisition to complete by maturity.
Funding the Proposed Acquisition
The funds raised from this convertible note issue are earmarked to cover costs associated with a proposed acquisition first announced in April 2024. While the company currently expects to repay the notes in cash without conversion, the convertible structure provides flexibility depending on how the acquisition unfolds. This approach balances immediate funding needs with potential future equity dilution.
Strategic Implications for NEXION
NEXION’s move underscores its commitment to expanding its hybrid-cloud and data centre footprint, leveraging its Perth-based 2MW data centre. The convertible notes issuance signals prudent financial management, enabling the company to advance strategic growth initiatives while managing capital structure and investor expectations.
Bottom Line?
NEXION’s convertible notes raise offers a flexible funding bridge, but the acquisition’s fate will shape the company’s capital future.
Questions in the middle?
- Will shareholders approve the conversion securities if the acquisition stalls?
- How will the proposed acquisition impact NEXION’s financial performance and valuation?
- What is the likelihood the notes will be converted versus repaid in cash?
