Heavy artillery

4 December 2012 By Andy Mukherjee

The commodities trader’s $1.2 bln bond-and-share issue, underwritten by major investor Temasek, eases funding concerns and squeezes short-sellers like critic Muddy Waters. But twisting shareholders’ arms to take part does little to ease the broader concerns about Olam’s business.

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Olam, the commodities trader under attack from short-selling firm Muddy Waters, on Dec. 3 announced plans to raise up to $1.2 billion by issuing bonds and warrants to existing shareholders.
Singapore state investor Temasek, which owns 16 percent of Olam, said it would take up any unsubscribed part of the rights issue.
By issuing new bonds, the company aims to allay concerns about its solvency, analysts said. Muddy Waters responded to Olam’s proposal by saying that the debt issuance “vindicates our thesis that Olam is in danger of failing.”
Olam is issuing $750 million of bonds due in 2018 with a coupon of 6.75 percent. The bonds will be issued at 95 percent of face value. Attached to the bonds are warrants which allow investors to subscribe to new shares in the company at $1.291 each after three years. If fully exercised, the warrants will raise a further $500 million.
The offering is fully underwritten by Credit Suisse, DBS, HSBC and JPMorgan.
At 1600 Singapore time, shares in Olam were up 2.54 percent at S$1.615.

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