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03-12-2012, 09:24 PM
Temasek as a 16% strategic holder is already doing its best to show support for Olam without committing further to lift its stake in Olam.
Look at the structure - US$ bond cum warrant issue. US$ issue that is to be issued on pro-rata basis to Olam holders. Make no mistake - this is no repeat of HSBC capital raising.
Temasek remains committed to Olam. However, it is buying time by only committing as a creditor (subscribing to the proposed US$ bonds with a free option to convert into equity via warrant conversion in the future) for the time being.
As we all know, creditors will get repaid ahead of equity holders during tough times when dividends can be omitted.
Given the mess that MW has created within a short span of time, the ability to raise new debts (no matter how creative it can be) is crucial to Olam as there is a need to convince all financial institutions and potential lenders that they still have the necessary backing of a strategic shareholder.
Once the dust settles and when all financing normalises (time heals all wounds), Olam must demonstrate its ability to sustain its growth strategies. Only then when share prices reflects the above efforts will Temasek exercise the warrants.
Bear in mind the 5 year US$ issue may not be as compelling as the present outstanding debts that Olam has issued. Following the recent MW incidents, there are already huge selloffs in Olam debt papers and Temasek via its under-writing commitments may just end up mopping up a big chunk of the latest financing plans.
Which is why I conclude that Temasek is doing the best it can along the track of HSBC recapitalisation attempts without immediately committing to a new equity injection (that I deemed as a more powerful alternative).
Not vested but actively monitoring for MBA style analysis.
Look at the structure - US$ bond cum warrant issue. US$ issue that is to be issued on pro-rata basis to Olam holders. Make no mistake - this is no repeat of HSBC capital raising.
Temasek remains committed to Olam. However, it is buying time by only committing as a creditor (subscribing to the proposed US$ bonds with a free option to convert into equity via warrant conversion in the future) for the time being.
As we all know, creditors will get repaid ahead of equity holders during tough times when dividends can be omitted.
Given the mess that MW has created within a short span of time, the ability to raise new debts (no matter how creative it can be) is crucial to Olam as there is a need to convince all financial institutions and potential lenders that they still have the necessary backing of a strategic shareholder.
Once the dust settles and when all financing normalises (time heals all wounds), Olam must demonstrate its ability to sustain its growth strategies. Only then when share prices reflects the above efforts will Temasek exercise the warrants.
Bear in mind the 5 year US$ issue may not be as compelling as the present outstanding debts that Olam has issued. Following the recent MW incidents, there are already huge selloffs in Olam debt papers and Temasek via its under-writing commitments may just end up mopping up a big chunk of the latest financing plans.
Which is why I conclude that Temasek is doing the best it can along the track of HSBC recapitalisation attempts without immediately committing to a new equity injection (that I deemed as a more powerful alternative).
Not vested but actively monitoring for MBA style analysis.