Capital Raising to Aid Reeling Businesses – BGL, TCL, SES, COH, TRS

  • Mar 26, 2020 AEDT
  • Team Kalkine
Capital Raising to Aid Reeling Businesses – BGL, TCL, SES, COH, TRS

Turbulent stock markets and shaken investor confidence are escalating the concerns of businesses, researchers, and economists. Maintaining ample liquidity in times of impending financial crisis is a crucial challenge for players in the market.

Banks, financial institutions, governments, as well as related authorities, are taking adequate measures to maintain liquidity in the market. Individual companies have resorted to capital raising through various means to ensure robust balance sheets, increase in liquidity, reduction in debts, fund working capital needs, as well as provide for further project advancement.

Let us take a walk through a few stocks that have announced capital raising in preparedness to cope with the market uncertainties.

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Metals and mining player Bellevue Gold Limited (ASX:BGL) has received firm commitments for $26.5 million in a share placement. The Company is all set to move on to the next phase of its growth strategy at the Bellevue Gold Project.

The placement was priced at 30 cents per share and was supported by prominent Australian and foreign institutions, including current institutional shareholders. The price of the share signifies a discount of 7.7 per cent to the Company stock’s last trading price of 32.5 cents.

Moreover, no shareholder approval is required for the placement since it was undertaken within the Company’s existing capital raising allowance.

BGL looks forward to utilising the proceeds from placement to

  • Fund the further programs of infill and resource extension drilling at the Bellevue Gold Project
  • Fund the economic studies in preparation for development
  • Provide general working capital

The Company believes that the proceeds shall ensure availability of ample cash to continue unravelling the value of the project through infill and resource growth drilling and undertaking the economic and technical studies simultaneously.

The BGL stock settled the day’s trade at $0.415 on 25 March 2020, up by 27.692% compared to the previous close. The Company has a market capitalisation of $191.72 million.

An ASX-listed industrials player, Transurban Group (ASX:TCL) has reached contractual close to raise $815 million of non-recourse debt through two new bank debt facilities funded in the Asian loan market for its 100% owned Hills M2 that has a concession ending in June 2048.

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TCL expects the final close in the coming weeks and is subject to customary closing conditions. Moreover, the proceeds from the raising shall be utilised for refinancing current bank facilities due to mature in December 2020 and November 2022 respectively and replacing them with a 10-year and a 15-year facility.

The Company states that

  • There is no further debt secured against the Hills M2
  • The issue shall boost the Group’s weighted average maturity
  • The issue has been priced lower than the Group’s current weighted average cost of debt

Moreover, the decision to refinance the debt facilities is taken considering the depth and strength of appetite demonstrated by debt investors.

The TCL stock settled the day’s trade at $12.430 on 25 March 2020, up by 11.181% compared to the previous close. The Company has a market capitalisation of $30.58 billion.

Sustainable and eco-friendly Biopolymer producer SECOS Group Limited (ASX:SES) has secured a commitment from numerous sophisticated investors, significant shareholders, directors and management for placement of shares to raise approximately $1.1 million.

The placement is expected to supplement SES’s current cash on hand of ~$1.5 million bringing the total cash balance as of today to approximately $2.6 million and suffice the necessary working capital to ensure the Company fulfils new purchase orders.

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It shall also assist in the continuous expansion of Biopolymer resin capacity and shall serve as a buffer against any unforeseen impacts over the near to medium term like the Covid-19. The Company has experienced a minimal impact from Covid-19 with few short-term plant shutdowns.

The issue of Director’s shares is subject to approval from the shareholders at the next AGM, and the overall decision to raise funds shall strengthen the balance sheet of the Company and reflect lower debt.

The SES stock settled the day’s trade at a price of $0.060 on 25 March 2020, up by 20% compared to the previous close. The Company has a market capitalisation of $20.13 million.

A global leader in implantable hearing solutions, Cochlear Limited (ASX:COH) has launched an equity capital raising encompassing

  • A fully underwritten institutional placement worth $800 million
  • A non-underwritten Share Purchase Plan to raise up to $50 million

Apart from this, COH’s comprehensive capital raising package also comprises of

  • A credit approved commitment for an additional $150 million bank facility from an existing lender
  • Suspension of the Company’s dividend until trading conditions improve following payment of the 1H20 dividend on 17 April 2020

COH’s pre-emptive and decisive action is likely to ensure strong capitalisation of the Company in times of current market uncertainties as well as better positioning of the Company.

Apart from an enhanced balance sheet and financial flexibility, COH looks forward to utilising the raisings to support the business during the current macro-economic uncertainty and significantly increase liquidity and reduce net debt.

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The fortified balance sheet shall empower the Company to endure current market uncertainties as well as reinforce its position as the global leader in implantable hearing solutions through continuous investment.

The COH stock settled the day’s trade at $168.000 on 25 March 2020, in line with the previous close. The Company has a market capitalisation of $9.72 billion.

While we talk about commitments and plans to raise funds, consumer discretionary stock The Reject Shop Limited (ASX:TRS) has successfully completed Pro-Rata Entitlement Offer of $25 million.

TRS had announced a 1 for 3.12 traditional non-renounceable pro-rata entitlement offer for fully paid ordinary shares at an offer price of $2.70 to raise about $25.0 million that was closed on 23 March 2020. Now, the settlement of the Entitlement Offer is planned to occur on 26 March 2020 with the issue and allotment of the New Shares to take place on the next day.

TRS has a shortfall of approximately $15.6 million in the Entitlement Offer which shall be taken up by sub-underwriters appointed by the Underwriter, Ord Minnett Limited. TRS had received valid applications for around $9.5 million under the Offer.

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The Company believes that equity raising shall help to focus on executing TRS’s operational objectives, including a range of strategic initiatives and efficiency opportunities. The Company is currently focused on improving and optimising the customer experience for all Australians while developing on its strategy to

  • Leverage its buying power
  • Promote national brands at everyday low prices
  • Implement several supply chain efficiencies

The COH stock settled the day’s trade at $2.700 on 25 March 2020, an increase of 6.719% compared to the previous close. The Company has a market capitalisation of $73.14 million.

Summing Up

Ensuring and maintaining liquidity is an emerging challenge for companies in current times of high uncertainty. As discussed, it won’t be a surprise if more companies come up with a capital raising plan in the near term as the survival of companies is crucial in the market where there are speculations of a global crisis that could be worse than the 2008 global financial crisis.

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