Pacific Andes International completes rights issue

Frozen seafood supplier Pacific Andes International Holdings (PAIH), yesterday announced that its rights issue was 136.8% oversubscribed, raising HK$566.4 million ($73 million). This is the first of two transactions designed to inject capital into Pacific Andes Holdings, PAIH's Singapore-listed subsidiary.

PAIH received 487 valid acceptances for the 944 million rights shares on offer, representing a subscription rate of 98.07%. There were another 497 excess applications for a further 1.3 billion shares, although approximately 30% of the excess shares were applied for by the controlling shareholder.

The shares were offered at a price of HK$0.60 each, at a ratio of one new share for every two existing ones. The price represents a 39.4% discount to the closing price of HK$0.99 on May 21, the last day of trading before the deal was announced, and a 30.2% discount to the theoretical ex-rights price (Terp). At the close of trading yesterday, PAIH's shares were trading at HK$0.75.

PAIH's controlling shareholder, NS Hong Investment, took 512.6 million of the rights shares, which include its 57.7% entitlement plus another 5.3 million excess shares. Hong had committed to buy its full entitlement and was also underwriting the rest of the deal. The remaining 418 million shares went to other shareholders. After the completion of the transaction, NS Hong's stake in the company will increase slightly to 53.9% from 53.7%.

The rights issue is the first of two transactions designed to inject capital into Pacific Andes Holdings (PAH), in which PAIH has a 65% stake. At the same time that PAIH launched its offering, Singapore-listed PAH launched a S$228.6 million ($143 million) rights issue of its own. The idea is that once PAIH completes its rights issue, it will have the money to take its full entitlement in the PAH deal. The rights issue structure is in this case thought to be a good way to raise capital when bank borrowing is not an easy option.

PAIH has committed to take up the 65% it is entitled in the PAH rights issue. The remainder is underwritten by Standard Chartered's Cazenove Asia unit and HSBC.

The subscription period for the PAH offering will start on July 2 and finish on July 16. The deal is expected to be completed at the end of July. 

The group is a vertically integrated supplier of frozen seafood: at the bottom of the chain is China Fisheries, the company that catches the fish. PAH ships and stores the fish, while PAIH processes and distributes the final products.