Pacific Basin raises $98 million from new share sale

Dry-bulk shipping firm Pacific Basin Shipping last night raised HK$761.7 million ($98 million) from the sale of new shares in an attempt to replenish its coffers for any potential distressed assets -- essentially ships -- that may become available as other companies struggle to cut costs or fail to meet their debt payments.

The Hong Kong-listed company offered 174.7 million shares, or 10% of its outstanding share capital, which was the maximum it could sell under a mandate obtained at its recently held annual general meeting. The deal was also quite small in terms of trading volumes, representing just under seven trading days based on activity in the past three months. The offer price ranged from HK$4.28 to HK$4.42, which was equal to a discount of 3.9% to 7.0% versus yesterday's close of HK$4.60.

The price was fixed marginally above the mid-point of the range at HK$4.36 for a 5.2% discount. The deal was multiple times covered, but with some price sensitivity -- initially at the bottom of the range but migrating slightly higher as the bookbuilding progressed. Like the rest of the Hong Kong market and supported by a recovery in the Baltic Dry Index, Pacific Basin had a strong run up until last Friday when it closed at a four-month high of HK$4.88, after adding 37.5% in the preceding seven trading days, which would have made investors inclined to keep the price as low as possible.

However, because the deal was done as a straight-forward sale of new shares, as opposed to a top-up placement where a substantial shareholder first sells old shares and then subscribes to the same number of new shares at the same price, the trade will not settle until next Tuesday (T+5) as opposed to on Thursday (T+2) as would have been the case with a top-up placement. That too would have made investors more price sensitive since it will involve additional risk for them. Indeed, the overall sentiment in the market appears to have become slightly more negative this week with Pacific Basin falling 5.7% on Monday and Tuesday combined.

As the price sensitivity crept higher, the quality of the investors also improved, according to a source, who said the majority of the 35 accounts who received allocations were long-only funds. Hedge funds were present on a smaller scale, however. The books were open for less than two hours after the Hong Kong market closed.

Underlining its strength in block trades this year, UBS was the sole arranger and underwriter of this trade, elbowing out Goldman Sachs, which did Pacific Basin's IPO in 2004 and has been involved in five of the past six deals in the name.