Hong Kong-listed Pacific Andes International Holdings (PAIH) and its Singapore-listed subsidiary Pacific Andes Holdings (PAH), have each launched a renounceable rights issue to raise HK$566.4 million ($73 million) and S$228.6 million ($143 million) respectively. The companies are involved in the supply and distribution of frozen seafood.
PAIH is offering a total of 944 million rights shares at a price of HK$0.60 per share, a 39.4% discount to the closing price of HK$0.99 on May 21, which was the last day of trading before the rights issue was announced. Shareholders will be entitled for one rights share for every two existing PAIH shares held.
The PAH offering, meanwhile, consists of 1.52 billion rights shares, with shareholders entitled to one new share for every one existing share they currently hold. The rights shares will be issued at S$0.15 apiece, a 50.8% discount to the May 21 closing price of S$0.305.
In relation to the theoretical ex-rights price (based on Thursday's close), the PAIH offering comes at a 30.2% discount, while PAH is offering its rights shares at a 34.2% discount. For PAIH, this is slightly below the 34%-35% discounts to Terp offered by several other issuers this year, including DBS, CapitaLand, Maybank, Bank Danamon and Chartered Semiconductor, but above what Keppel Land is offering. The Singapore property developer, which is currently in the market with a S$712.3 million ($478 million) rights offering due to close in mid-June, is selling shares at a 27.6% discount to Terp - the tightest gap among major Asian issuers so far this year.
The PAH offering comes with 304.8 million warrants -- exercisable over the next two years -- which will each give the holders the right to buy one PAH share at S$0.23. One warrant will be given for every five rights shares that are subscribed to. If all the warrants are exercised, the company will get additional gross proceeds of S$70.1 million.
Pacific Andes is a vertically integrated supplier of frozen seafood, with three listed companies. Responsible for the actual catching of the fish is China Fisheries. PAH is involved in shipment, warehousing and trading, while PAIH is in charge of processing, onshore distribution and retail distribution.
The aim of the rights issue is to raise additional working capital and to inject equity into the group to reduce leverage. Due to the vertical nature of the group, an easy way to provide equity to PAH as 'the middle' company is to do a rights issues where PAIH takes up its full entitlement. In turn, PAIH will get capital from its majority shareholder through its own rights issue. In a statement, PAH's chairman Ng Joo Siang noted that the turmoil in the global financial markets has led to a reduced availability of external borrowings and higher cost of funding, making a rights issue a good alternative.
PAIH owns 65% of PAH, while NS Hong owns 57.7% of PAIH. Hong will take up his full entitlement in the PAIH offering and will also underwrite the remainder of the deal.
Cazenove and HSBC will underwrite the 42.3% of the PAH rights offering not taken up by PAIH and will also act as joint lead managers.
The results of the PAIH rights issue will be announced on June 23, while the PAH shares will be allotted on August 7.
