First Ship Lease Trust

[ghchua]

Announcement is out for a 3 for 2 (more than 1 for 1!) rights issue. Shocking how dilutive the rights are, and even more so as the use of proceeds (on fleet renewal?) doesn't really seem necessary. Crucially also, we are missing details on the exact fleet that FSL is looking to acquire.

Anyone looking to keep the shares and subscribe for the rights issue will need to put a lot of faith in the new management. My instinct would be to bail immediately.

The market had reacted very badly to this deeply discounted, dilutive, non-underwritten and non-renounceable preferential offer. Please take note that this is a preferential offer, not a rights issue.

Questions that unitholders of this business trust should ask:

1. If the proceeds is meant for fleet renewal, why isn't this preferential offer underwritten? Since they have said that there is no minimum amount that must be raised from this preferential offer, save for the undertaking of the controlling shareholder, I wonder how many ships they can buy with no underwritting.

2. If the discount from this share issue is so deep at around 31.8% from the last traded price and it is so dilutive at 3 for 2 (more than double the current share issue), why is it not structured as a renounceable rights issue instead? In this way, unitholders who do not wish to take up the share issue can sell their nil-paid rights entitlements in the market. Currently, unitholders would have to sell their units in the market to raise funds for the preferential offer as they will be diluted if they don't take up the offer.

All in all, it seems to me that this fund raising exercise has been badly structured.