8 firms raising Rs. 7.6 b via Rights

Eight firms are hoping to raise around Rs. 7.6 billion by way of Rights Issues to finance a multitude of reasons.

Nations Trust Bank and The Lanka Hospitals Corporation (Apollo Hospital) have separately announced Rights Issues to raise Rs. 1 billion each while the former Walker & Greig, which now styles itself as Environmental Resources Investments PLC and owned over 90% by foreign shareholders, plans to raise Rs. 4.1 billion.

The other three are Ceylon Hotels Corporation (Rs. 300 million), Muller & Phipps Ltd (Rs. 216 million) and LB Finance (Rs. 172 million).

Previously Ceylon Glass Company announced a Rights Issue of five for seven at Rs. 1.90 each to raise Rs. 752 million to part finance its expansion project at Horana and Coco Lanka (one for one at Rs. 18 each) raised Rs. 113.4 million to redeem debentures, settlement of short term and related company borrowings, working capital requirement and investment in infrastructure for local distribution.

Analysts said that the confidence by these companies to tap their shareholders to raise fresh capital augurs well for the Colombo bourse, which has been depressed for months due to the impact of the security and political situation.

Walker & Greig’s plans of raising Rs. 4 billion via a Rights Issue of 24 new shares for one held at Rs. 10 each (existing foreign shareholders have committed to take their entitlement amounting to Rs. 3 billion), is to raise capital for various investment opportunities that meet with the Company’s objectives and risk control thresholds.

The Lanka Hospitals (Apollo) issue of three new shares for seven held at Rs. 15 each is to retire a significant portion of the medium and short term debt of the company. This is as per borrowing conditions and balance if any will be used for working capital. LB Finance is raising Rs. 172 million to enable the growth of the company in compliance with the directions and rules issued under the Finance Companies Act while Muller & Phipps will use Rs. 216 million for the redemption of the unquoted preference shares, settlement of debt and finance working capital.

Ceylon Hotels Corporation’s plan to raise Rs. 300 million is to settle funds obtained to finance the voluntary retirement scheme/s, to effect further to conversion of the company from a corporation to a limited liability public company and finance the VRS of its subsidiary Kandy Hotels Company Ltd.

NTB, apart from its 1 for 3 Rights at Rs. 25 each, also announced a warrants issue attached to the Rights on the basis of one Warrant (2010) for one Rights at exercise price of Rs. 30 and one Warrant (2011) for two Rights at Rs. 35.

The Bank said the innovative attachment of Warrants to the Rights, will entitle all those who exercise their rights to be permitted to warrants, which could be converted to shares at a future date, at a fixed price. A shareholder will be entitled to Warrants only to the extent of the subscription to the Rights.

“The proceeds of the Rights Issue and the future proceeds upon exercising the warrants will ensure that the Bank is adequately capitalized to support its growth momentum over the next few years,” NTB Chief Executive Officer Zulfiqar Zavahir said. The attachment of warrants ensures that the commitment of the shareholders for the infusion of further capital is evident, giving confidence to regulators, depositors, rating agencies and other interested parties.

“The attachment of warrants to the rights should be very acceptable to the shareholders, as they are called upon to only take up the rights as and when the Bank actually needs capital funds, at a price, which is fixed now,” Mr. Zavahir added. The warrants will be listed on the stock exchange so that in the interim period, it will be tradable.

Some of the Rights Issues announced are subject to shareholder and regulatory approvals.