Olam gets SGX's green light for rights issue

PHOTO: Olam gets SGX's green light for rights issue

Two weeks after proposing a bond-cum-warrant rights issue that sparked controversy over its merits, Olam International announced yesterday that the Singapore Exchange (SGX) has given its in-principle approval for the issue.

The nod from the SGX last Friday was for the dealing in, listing of and quotation for the bonds, the warrants and related new shares.

Conditions included the commodities group having to seek the consent of independent shareholders for the payment of sub-underwriting commission by the joint lead managers to Temasek unit Aranda Investments, and undertaking to announce any significant disbursement of proceeds raised from the rights issue.

Olam's proposed issue - consisting of up to US$750 million (S$915 million) in bonds accompanied by warrants that will raise up US$500 million upon conversion - drew criticism over its desirability and came after panic selling of its stock following allegations by US-based short-selling research firm Muddy Waters of flawed accounting standards.

Under the proposed fully renounceable issue, for every 1,000 shares that an entitled investor has, he can subscribe for 313 bonds of US$1 face value each.

The bonds come with 162 warrants convertible to ordinary shares at US$1.291 apiece.

The bonds will carry a 6.75 per cent cash coupon and have an issue price of 95 US cents each or 95 per cent of face value.

The joint lead managers are Credit Suisse, DBS Bank, HSBC and JP Morgan.

The offering - seen by some as a way to shore up the stock in the face of short-selling as investors who lent out their shares will have to recall them to participate in the offer - has been roundly criticised, most notably by former Temasek managing director Michael Dee.

He questioned why Olam chose to raise such an "egregiously expensive debt issue" - with an effective "eye-popping" cost of 13.7 per cent - and urged the firm to cancel it.

Analysts have also questioned the need for the rights issue when Olam had earlier insisted that it had sufficient liquidity.

Olam announced separately on tuesday that the share transfer book will be closed at 5pm on Jan 2 next year to determine shareholder entitlements relating to the proposed issue.

The shares will trade on a "cum" basis up to Dec 27.

The listing of the bonds and warrants is expected to take place at the end of January or early February.

Olam had filed a lawsuit against Muddy Waters and its founder Carson Block for "slander, libel and malicious falsehood".

Shares in Olam fell one cent yesterday to $1.395. Having lost 34.5 per cent in value so far this year, the stock is the second worst- performing member of the benchmark Straits Times Index, which has gained 19.1 per cent.