Nuplex slumps 44% on revised capital raising at deep discount

Friday 20th March 2009

Nuplex Industries shares slumped 44% after the specialty chemicals maker was forced to amend the terms of its capital raising, lifting the amount raised via a rights issue at just 23 cents a share, less than a fifth of their price before a trading halt this week.

The shares tumbled 47 cents to 60 cents when they resumed trading today, wiping about $39 million from the company's market value. The rights issue is struck at seven new shares for each existing share held, resulting in 577.6 million new shares being issued, it said in a statement

Nuplex will raise $132.8 million via the rights issue to repay debt, up from the $110 million it had intended to raise. It abandoned a plan to raise some of the funds via a share placement after investors balked at the terms.

"The capital of $132.8 million to be raised from the rights issue will be sufficient to meet the company's short and medium term capital needs in the current economic and trading environment," Nuplex said.

First NZ Capital has agreed to fully underwrite the issue, for a fee equal to 2% of the amount raised, and retains a call option for five days after the transaction requiring Nuplex to make a top-up placement of $22.8 million, or 15% of the shares on issue, at 23 cents apiece.

Nuplex's existing shares trade ex-rights on April 2. The offer closes on April 20, with the allotment of new shares on April 23.

The value of Nuplex's foreign debt has surged in New Zealand dollar terms as the kiwi currency has weakened. At the same time, earnings fell in the first half of the 2009 business year, reflecting the global economic downturn.

That combination of events pushed Nuplex's senior debt cover ratio to above the covenant requirement of 3.00 times.

Nuplex's banks this week agreed to revise the terms of its senior debt cover ratio, waiving the requirement that it be no more than 3 times in the period up to April 30 and allowing the ratio to reach 3.5 times between May 1 and June 29, easing back to 3.25 times from June 30 to Sept. 29 and back to 3 from Sept. 30, according to a company statement today.

The banks imposed conditions on the agreement, including capping dividend payments at 60% of net profit, applying any assets sales proceeds over $2 million to debt repayment and taking a general security over the company's Australian and New Zealand assets.

Nuplex bank debt facilities total A$350 million and following the capital raising the total amount drawn will be about $240 million, it said.

The rights offer requires NZX and ASX approvals and agreement from the Overseas Investment Office.

By Jonathan Underhill

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