Nuplex scraps institutions offer

Nuplex has seen its share price fall from $7.75 to $1.07 in less than two years. Photo / Kenny Rodger

Nuplex has been forced to scrap its institutional share placement, the Business Herald understands.

Instead, the company hopes to raise up to $150 million through a seven-for-one rights issue set at 23c per share.

The resins and chemicals maker was expected to finalise details of its capital raising by the end of yesterday after spending four days in talks with institutions in a process designed to set the price and terms of the raising.

It announced plans to raise $110 million on Monday through a new share placement inviting institutions and habitual investors to inject new equity into the company followed by a rights issue to existing shareholders.

But the Business Herald understands Nuplex will now rely on the rights issue to raise the money it needs to keep its bankers happy after its new share placement failed to gain enough support from institutions.

Nuplex had suggested a guidance share price of 55c to 60c for the placement with the hope of raising $60 million.

The other $50 million would then be raised through the rights offer to existing shareholders at 50c per share.

But pressure from institutions saw Nuplex drop the price to a flat 50c per share to all parties with $55 million raised through the new share placement and $55 million raised through the rights issue.

But even that failed to win over the institutions and the company had to extend the book build by two days.

The Business Herald understands Nuplex now plans to raise more than the $110 million needed to satisfy its banking covenants by going to existing shareholders with a seven-for-one rights issue.

That means for every share a person owns they will have the right to buy another seven at 23c per share.

The move is expected to be highly dilutionary for those who cannot afford to participate by buying the rights.

Rights that are not bought by shareholders will return to the underwriter First NZ Capital to be undertaken either by itself or a number of sub-underwriters.

The Business Herald understands institutions had until 5pm yesterday to say how much they would be prepared to sub-underwrite the deal by.

Calls to First NZ Capital were not returned and a spokesperson for Nuplex said the company had no comment to make.

Nuplex is expected to come off a trading halt today. Market commentators said the share price would fall but there was no consensus on how far it might drop.

Nuplex must raise at least $110 million as part of an agreement it reached with its bankers on Monday.

It had to reach the new agreement after it breached its senior debt cover ratio because of a steep fall-off in demand and a drop in the New Zealand dollar.

Nuplex shares have fallen from $7.75 in October 2007 to $1.07, dropping from a market cap of $639 million to $88 million.