The $1.25 rights price came in at a whopping 47 per cent discount to the theoretical rights price of $2.37 a share, and the closing price when last the stock traded about three weeks ago of $3.50 a share
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Transfield rewrites rules for capital raisingFont Size: Decrease Increase Print Page: Print MARTIN COLLINS: John Durie | November 28, 2008 Article from: The Australian TRANSFIELD chair Tony Shepherd yesterday laid down a blueprint for capital-starved companies facing hostile equity and debt markets.
He accepted close to record discounts on his equity to get the company back to business.
The equity capital market textbooks will no doubt devote a chapter to the Transfield and ConnectEast chair who in recent weeks has raised $600 million in very different dealsConnectEast is a new toll road in Melbourne that has too much debt and not enough traffic. But toll roads are an easy sell because they are natural monopolies that leave little room for management errors.
Industrial services companies are different and, in this case, Shepherd took the moral high ground by announcing Peter Watson's imminent departure ahead of the capital raising.
The company has high gearing at 50 per cent, but has a seven-year track record of 20 per cent annual compound growth. And while it didn't make consensus forecasts at its last outing, it met its own forecasts and says there will be more profit growth this year, with $12 billion in work on hand to keep it running for three years at least.
Its other sin of course is running a US business when that country is a basket case.
So, Transfield was spotted running to the pig trough for more capital from a mile away, with a chunk of debt to be renegotiated in July next year.
The $250 million sought was never a chance, particularly when the Belgiorno-Nettis family, which owns 28 per cent of the company, wasn't going to commit to the $60 million due to pay for the one-for-one rights issue. In the end, when the issue was struggling, the family kicked in for $10 million instead of the $5 million originally offered and Schroeder's and AMP also came to the party.
Best of all, the banking syndicate led by ANZ, Westpac, RBS and HSBC agreed to accept $125 million in capital and an extension to the next rollover date, three years, and protection of exchange rate risk for the $US debt.
The $1.25 rights price came in at a whopping 47 per cent discount to the theoretical rights price of $2.37 a share, and the closing price when last the stock traded about three weeks ago of $3.50 a share
This is a huge discount in anybody's language but, hey, Anheuser Bush Imbev took a 69 per cent discount on the $12.8 billion right issue it completed this week for its $80 billion Anheuser Busch acquisition.
Hopefully, Shepherd has put his capital problems behind him, which is better than struggling along on hope.
TSE Price at posting:
$2.38 Sentiment: None Disclosure: Held
