Warrants Highlight

Olam rights issue underwritten by Temasek

The Singapore equity markets saw some drama with Olam, the stock fell 8.0% since Carson Block commented on the solvency of the firm (19th November). Yesterday, it was the top gainer in the STI, rallying 1.6% for the day while the benchmark index declined 0.1%.

Macquarie’s Olam warrants

Rights issue backed by Temasek
The rally in Olam came after the company announced plans for a rights issue in order to raise up to US$1.25 billion in capital. The rights issue will consist of up to US$750 million bonds due in 2018, and accompanied by warrants which will raise up to an incremental US$500 million of proceeds. In the event that the bonds and warrants are not fully subscribed, government-owned investment firm Temasek will give support and take up the remainder.

CEO Sunny Verghese said that “this decisive, bold, large issuance should arrest any lingering doubt that anybody has about anything to do with the firm’s liquidity or solvency position. It is fairly unprecedented in Temasek’s history to underwrite a bond issuance…. (hence) it reflects their confidence in Olam’s strategy and ability to execute that strategy”.

Muddy Waters not wavered
Muddy Waters stood by its view, mentioning that the issuance only “validates their thesis that Olam is in danger of failing,” and that it will only “postpone the likely collapse of the commodity trader”.

Below is a recap of events in the past two weeks.
19th November: Carson Block questioned company’s accounting methods.
20th November: Trading halt. Stock fell 7.5% for the day after resuming trading at 3.30pm
21st November: Olam sues Muddy Waters and Carson Block for defamation in the Singapore High Court. Stock rebounded, gaining 5.3% for the day
27th November: Muddy Waters issue a 133-page report on the company recommending a “strong sell” and valued Olam on a “liquidation basis”. Stock declined after report, closing 6.0% down at the end of the trading session
28th November: Trading halt, trading resumed at 10.45am. Stock tumbled 3.9%, ending on a 3-year low of $1.50
29th November: Olam retorts, issuing a 45-page long report with the message, “this time the mud won’t stick”. Stock added 4.0% for the day.
30th November: Muddy Waters offers to pay for Olam to get its debt rated by S&P. The offer will expire today, 5th December.
3rd December: Trading halted for the whole day. Announced rights issue
4th December: Resumed trading, stock gained as much as 8% before trading lower to add 1.6% for the day.

Singapore Market Wrap

Region slipped on poor US data

Monday night's US November manufacturing ISM data fell to 49.5 against economists' expectation of 51.4. This value, which signals a contraction, reignited concerns on the growth of the world's biggest economy. The Reserve Bank of Australia also announced a cut to the benchmark interest rate to 3.0%, it's lowest since 2009. The STI fell marginally 0.1% to 3062.12 day-on-day (d.o.d).

Call STI 3100MBeCW130228 (RF9W) exercise level 3,100.*
Put STI 2950MBePW130228 (RG0W) exercise level 2,950.*

Yangzijiang clinched US$170 million order
Yangzijiang won it's first offshore vessel contract to build a self-elevating Mobile Offshore Jackup Drilling Rig. This US$170 million contract will have the Rig delivered no later than second quarter of 2015 and also includes an option to add another identical unit. Yangzijiang fell 2.2% to $0.905 for the trading session.

Call YangzijiMBeCW130801 (R3MW) exercise price $0.950.*

Olam proposed US$750 million of bond-cum-warrant rights issue
Olam has announced a renounceable underwritten rights issue comprising US$750 million of US$ denominated bonds at 6.75% which will due 2018. This includes 387,365,079 free warrants on shares with each warrant allowing the right to subscribe for 1 new share in Olam. The bonds and warrants are able to be held and traded separately when the issue is listed. Temasek, the second latest shareholder in Olam according to Bloomberg, has taken up their rights entitlement and have also committed to subscribe for all bonds and warrants that are not subscribed. Olam rose 1.6% to $1.60 d.o.d.

Call Olam MB eCW130603 (R3LW) exercise price $1.80.*

Overnight Market Wrap

S&P falls after Republican's plan was rejected

Last night, the S&P fell 0.2% to close at 1407.05 for the day.

Not a surprise, the budget talks in Congress were in focus since there is less than a month left before the automatic spending cuts kick in. Despite the impending dateline, the Republicans and Democrats have yet to agree on an alternative plan so as to avoid the so called fiscal cliff.

President Barack Obama's administration was adamant on including higher taxes for the highest-income Americans and rejected a Republican plan which omitted just that. He said that "We're going to have to have higher rates for the wealthiest" and that it is "just a matter of math".

Overnight Markets

Indices	Last	Change
STI	3062.12	-0.1%
HSI	21800.00	0.1%
DJIA	12951.80	-0.1%
S&P 500	1407.05	-0.2%
Nasdaq	2996.69	-0.2%
China A50	6956.48	1.0%

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Ex-dividend dates:
Fri 7 Dec: SPH ($0.17)