Buy now pay later company Zip Co has launched a “liability management exercise”, in which it proposes to restructure A$330 million of zero coupon convertible notes to a liability of A$137.8 million.

Note holders will be invited to convert their notes into ordinary shares plus cash, and accept restructured notes that have 47.5 per cent of the face value of the outstanding notes.

This follows a similar transaction in December, when Zip offered holders of $70 million of its convertible notes cash and shares in return for discounting the value of their notes.

The $400 million of zero coupon convertible bonds were issued in April 2021 when the company was looking to expand. Since then, with the business in retreat, the convertible notes have been seen as a flaw in Zip’s capital structure.

The company also launched a placement to raise $24.7 million of new equity. The proceeds of the placement will be used to fund the cash incentive price under the conversion invitation and transaction costs.

Zip said at the end of the process net debt will be reduced by around $192 million.