Nuplex's capital lifeline in doubt

Nuplex needs $110 million as part of a deal with banks to reduce its debt. Photo / Kenny Rodger

The future of Nuplex's $110 million capital raising may be under threat after major institutions were last night told its book building process would not be completed in time for today's market opening.

The Business Herald understands that the plastics and resins maker had initially been trying to raise $60 million of the $110 million through the institutional offer and had set a share price guidance of 55c to 60c.

Institutional investors were also told the rights issue to small retail shareholders would then look to raise the other $50 million at a 10 per cent discount to whatever price was set by the book build.

Under pressure from institutional investors, Nuplex said it would drop its expected book build price guidance to 50c and level the playing field between the institutions and retail investors by setting the same price and splitting the capital raising equally.

But even that seems to have failed to attract the level of investment the company needed.

An industry source, who did not wish to be named, said he understood the company had managed to attract only $35 million in commitments.

Another industry player said he had been told the capital raising would be delayed in order for the company to re-evaluate what was required for the placement offer to go ahead.

He said the company would have to talk to institutional investors about revising the offer over the next few days.

That meant the placement would not be going ahead in the current form.

The source said it looked as if a major institutional shareholder had decided not to participate in the book build when it had been expected to do so.

AMP and the Government's Accident Compensation Corporation are both major shareholders who would have the potential to stop it going ahead if they were not happy with the terms.

The $110 million injection is a requirement of a new agreement Nuplex reached with its banking part ners on Monday and without it the company will be forced to go back into talks with the banks over the A$350 million ($435 million) in debt it has.

It had been expected to announce the book build share price today.

Nuplex group managing director John Hirst did not return calls in time for press.

On Monday Hirst said he was confident of the capital raising going ahead and believed the company would be supported by its shareholders.

Nuplex hit trouble in mid-February when its share price plunged by 25 per cent over three days, sparking an NZX inquiry which forced the group to reveal it was in talks with its bankers over a breach in its senior debt cover ratio.

The company had hoped to finalise discussions in time for its interim result on February 26 but was unable to do so. It then announced a half-year profit drop of 76 per cent to $5.96 million and suspended its dividend to try to repay debt levels which have jumped because of the falling New Zealand dollar.

The company's earnings before interest tax, depreciation and amortisation (ebitda) were down to $43.3 million, resulting in the breach of its senior debt cover ratio covenant of three times ebitda.

The company is hoping to raise the $110 million to drop its debt from A$350 million to A$240 million.

The capital raising is part of its conditions with the banks but it must also gain shareholder approval at a meeting scheduled for April 3 because the institutional placement is likely to exceed 15 per cent.

Nuplex's shares last traded at $1.07 on Friday but have dropped from $6.50 a year ago.