Olam International

[Stocker]

The Straits Times
www.straitstimes.com
Published on Dec 06, 2012
News Analysis
What's the deal behind Olam's rights issue?
Capital-raising exercise looks like a good deal, but raises more questions

By aaron low

AT FIRST glance, Olam International's capital-raising exercise is a pretty sweet deal for investors.

The rights issue is a complex structured deal that allows investors the right to subscribe to a bond offering that has warrants attached.

For every 1,000 shares an investor holds, he can subscribe to 313 bonds, which come with 162 warrants. The total outlay will be $363.

The five-year bond itself will pay an interest of 6.75 per cent. But because it is being priced at 95 per cent to its face value of US$1 (S$1.21), its effective interest rate is actually about 8 per cent.

The warrants can be converted into Olam shares at the conversion price of $1.575 but only after a period of three years. The value of these warrants, which can be traded over the exchange, are a bit trickier to estimate. They become valuable only if Olam shares trade above $1.575.

One question; If we purchase Olam share at this level, 1.44/1.445 and do not want to take up the bonds and warrants, do we get diluted in value ofour holding ?