Feb 2015 Financial News

TCL approves rights issue at 24 per cent premium

Feb 09, 2015

The board of Trinidad Cement (TCL) on Friday passed a resolution to raise a maximum of $362 million in new capital through a rights issue of 124,882,568 new shares at a price of $2.90 a share. The TCL shareholders will be offered the right to purchase one new share for every two shares they hold. The $2.90 rights issue price is a 24.5 per cent premium of TCL’s share price as at the close of trading on Friday.

The rights issue means that an individual investor who owned 10,000 TCL shares (which were worth $23,300 on Friday) would have the right to purchase 5,000 more shares at a price of $2.90 each, (investing an additional $14,500 in the cement producer). The investor would then own 15,000 TCL shares, which would be worth $43,500 as the TCL share price is expected to increase to $2.90.

If all of TCL’s shareholders subscribe for the 124.88 million shares being offered in the rights issue, the number of shares in issue by company will increase by 50 per cent from 249,765,136 to 374,647,704. In a brief interview yesterday, TCL chairman Wilfred Espinet said in establishing the terms of the rights issue, the board took into consideration the shareholders’ situation especially the fact that they have gone for eight years without a dividend and have suffered a diminution in the value of their shares. 

He noted the rights issue price is “substantially more than what the gurus had anticipated,” an apparent reference to comments made by TCL watchers, including the company’s former CEO Rollin Bertrand. In a letter published in the Guardian on January 6, Bertrand predicted that “the shares will be issued at $1.90 or US$0.30 per share,” as “shares issued during a rights issue are normally offered at a discount.” He also estimated that the rights issue price would result in a 66 per cent dilution.

And yesterday, in a letter published in the Sunday BG, Bertrand described the rights issue as “a bad deal for all shareholders except Cemex,” and asserting that “due to the high dilution it will permanently condemn TCL’s shares to the basement and the price may go lower than the IPO price of $0.75.”

Minority shareholder advocate Peter Permell said the publication of the rights issue notice raised a number of questions, including: have TCL shareholders resident in Jamaica and Barbados also been notified of the rights issue; does the issue require shareholder approval and will the board be issuing a directors’ circular.

One TCL individual shareholder said the rights issue was being priced to attract institutions and not individuals, but that there was a probability that the share price would go up to $2.90 in the short term. TCL is due to host a special shareholders’ meeting today to consider and vote on the removal of the 20 per cent cap on a single shareholder owning the company’s shares.

Source:
Trinidad Guardian
Monday February 9, 2015

http://www.guardian.co.tt/news/2015-02-09/tcl-approves-rights-issue-24-cent-premium