KEY POINTS:
Market turmoil has prompted Pike River Coal to drop the price on shares it is offering in a $60 million rights issue in order to lock in support from the deal's underwriters and encourage takeup by shareholders.
The company, majority-owned by New Zealand Oil and Gas and Indian
companies Gujarat and Saurashtra, is developing a $240 million coking coal mine on the South Island's West Coast.
It has "significant capital purchases currently in progress or about to be incurred", and this month announced a rights issue to raise $60 million by offering shareholders new shares at $1 each on a one for 3.6 basis.
The issue was to be underwritten by Wellington investment bank McDouall Stuart and the company's three leading shareholders.
However, Pike River yesterday dropped the price of the new shares to 90c saying it was concerned "to ensure that the global stock market volatility and weakness over the past week did not give rise to an event where standard termination clauses contained in the rights issue underwriting agreement could be invoked".
The agreement would have allowed the underwriters to withdraw from the deal if the NZX-50 index dipped more than 10 per cent during the offer period. The index came perilously close to falling by that much in recent days and Pike River's shares have dipped below the original offer price, yesterday falling 3c to 95c.
Pike River managing director Gordon Ward said the price drop was intended to make the offer more attractive to shareholders but the main concern was that the market volatility could have given the underwriters the option of walking away from the deal.
"That gave us cause for some concern," he said.
The underwriters have now agreed that the market termination events in the underwriting agreement would now be measured starting from the close of business on Thursday this week, adding substantial headroom to allow for further market turmoil.
In order to raise the $60 million it is seeking, the company has increased the number of new shares issued to 66.67 million.
The offer will now open on February 11 and closes on March 6.
The bare bones
* Pike River Coal has dropped the price of shares on offer in its $60 million rights issue from $1 to 90c.
* Market turmoil has seen the price of existing shares fall below the original offer price.
* However the company says its move is primarily to lock in support from the deal's underwriters.
* The NZX-50's recent losses could have triggered an out clause in the agreement with the underwriters allowing them to walk away from the deal if they wished.