Woodchipper Gunns may seek to raise about A$400 million ($512 million) to cut debt and support the development of its A$2.5 billion pulp mill project, in what one analyst describes as its "last throw of the dice".
The amount of the proposed new capital raising is much larger than the A$280 million capital raising previously proposed by Gunns, which was derailed when New Zealand billionaire Richard Chandler pulled out. Gunns said yesterday that some elements of the new proposed capital raising, which could involve a placement of shares to new investors, were still to be finalised.
Consequently, Gunns requested that its shares remain suspended from trading and said it would provide a further update on April 2.
Gunns, which wants to develop a controversial A$2.5 billion pulp mill at Bell Bay in Tasmania, said it would seek to raise enough money to significantly cut its debt and strengthen its balance sheet.
"Investors have encouraged the company to raise sufficient equity capital to provide it with the desired flexibility in its approach to financing the Bell Bay pulp mill," Gunns said. "Additional financial flexibility is likely to result in a superior outcome in the pulp mill financing.
"In addition, the company believes that its ongoing non-core asset sale programme will be enhanced by a material strengthening of its balance sheet."
Gunns said that in preparation for the equity raising, the company and its adviser were reviewing the process of the non-core asset sales, bank facilities and the financial metrics relating to the Bell Bay pulp mill.
Shares in Gunns were suspended from trading on the ASX on March 13 at the request of the company.
Gunns shares had earlier been placed in a trading halt after the Singapore-based Richard Chandler Corporation decided against investing A$150 million.
Morningstar analyst Peter Warnes said that if Gunns were to raise A$400 million in capital at 12c per share, the company would have to issue 3.3 billion new shares, bringing the total number on issue to 4.2 billion.
"This is the last throw of the dice," Warnes said.