Halcyon Agri proposes issue of guaranteed perpetual securities in place of rights issue

NATURAL rubber supplier Halcyon Agri Corp has proposed the issuance of guaranteed perpetual securities as its latest fundraising option, rather than the earlier proposed rights issue.

In a regulatory filing, the mainboard-listed firm said this move is a "more optimal and equitable" funding option amid current market conditions. This comes just two months after the firm proposed a renounceable non-underwritten rights issue of up to 797.5 million new shares at 22 Singapore cents apiece. The mainboard-listed firm had planned to offer eligible shareholders one rights share for every two existing ordinary shares they hold. The rights issue was meant to be undertaken via the general share-issue mandate.

"In light of the recent share price movements and in consideration of current market conditions, the company has been exploring various means of alternative equity fundraising options which are more suitable under the prevailing circumstances," said the firm on Friday.

Shares of Halcyon Agri have fallen about 20 per cent since late June, when the firm said it would raise funds through the rights issue. The counter closed at 22 cents on Friday, down 2.2 per cent.

Chinese state-owned enterprise Sinochem International Corp (SIC), which owns Halcyon Agri's major shareholder Sinochem International Overseas, on Aug 27 passed a resolution to approve the provision of a corporate guarantee to support the issuance of perpetual securities of up to US$200 million.

Halcyon Agri said the estimated net proceeds from the issuance of guaranteed perpetual securities would be greater than the estimated net proceeds of the earlier proposed rights issue of US$125.4 million, after deducting estimated expenses.

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The additional proceeds would enable the firm to better achieve the rationale of the rights issue, that is, to enhance the group's financial position by adding liquidity, augmenting its capital base thus reducing overall gearing; and provide the group with "greater financial capability and flexibility to capitalise on any investment opportunities in a timely manner".

Halcyon Agri further said the SIC guarantee "enhances the marketability" of the guaranteed perpetual securities with institutional investors. "There is better certainty on the amount of proceeds that can be raised through the issuance of guaranteed perpetual securities, compared to the rights issue as the issue price may not be attractive to investors based on current market environment."

The firm added that, unlike the rights issue, the issuance of guaranteed perpetual securities will not lead to the dilution of minority holdings.

Halcyon Agri said it is "not customary practice" for SIC to provide a guarantee to its subsidiaries that are not wholly-owned. "SIC's willingness to provide such corporate guarantee to the company demonstrates its strong support as the indirect major shareholder of the company."

The provision of the guarantee is subject to the approval of SIC shareholders at the upcoming extraordinary general meeting on Sept 14.

As at Friday, Halcyon Agri said it is still reviewing the indicative terms of the guaranteed perpetual securities received from the financial institutions. Its principal terms and conditions have not been finalised.