Asciano Group securities bounced back yesterday, regaining the ground lost in Tuesday morning’s sharp sell off that stripped nearly 60% off the company’s value from the share price.
Investors stripped about $720 million from the company’s market capitalisation on Tuesday, driving Asciano’s stapled securities to a close of 69c – a drop of $1.03 or 59.88% – amid rumours of a capital raising.
Asciano securities sank as low as 49.5c in early trade yesterday, but clawed back ground and finished up 66.7%, or 46c at $1.15.
Strong support for the company emerged in a substantial shareholding notice from the Commonwealth Bank yesterday.
It revealed that its stake (held through its funds management operations) had risen to the point where the CBA had become a substantial shareholder with a 5.2% stake, or more than 36.3 million AIO shares. Some of these shares are held by the CBA for an external fund manager, 452 Capital.
The CBA shareholding notice revealed the buying had started in early July and finished on November 7.
(CBA shares hit a three year low yesterday of under $35 ahead of today’s AGM in Sydney and the expected earnings update).
AIO securities were placed in a trading halt until after the market closed and Asciano chairman Tim Poole sought to reassure investors a monetisation process to assist funding was "well advanced" and that the company was not contemplating an equity raising.
"Asciano is not currently contemplating an ordinary equity raising, and has not approached or appointed any advisers in respect of such a capital raising," Mr Poole said in a letter to shareholders.
Mr Poole said the company had met with a range of potential financial partners to discuss the partial monetisation of the Pacific National coal haulage business.
Merrill Lynch said in a client note that Asciano requires asset sales to pay down debt and fund capex requirements, estimating that a 50% stake in the coal haulage business could be worth up to $900 million.
Asciano, which operates the Pacific National rail operations and Patrick ports, is required to refinance $2.8 billion in debt by May, 2010.
The transport group rejected a takeover approach by private equity firms TPG Capital and Global Infrastructure Partners in August worth $3.1 billion, or $4.40 a security, saying it was not enough.
Citibank compounded Asciano’s woes on Tuesday after advising investors to "cut their losses" and sell the stock, with "more pain expected in the near term before any gain emerges".
The Reserve Bank’s rapid cuts in interest rates has forced Australia’s third force in grocery retailing, Metcash, to restructure its loans and funding arrangements and take an after-tax charge of $17 million to terminate an interest rate hedge.
But there’s an upside; the company said in a statement to the ASX yesterday that removal of the interest rate hedge will save the company $12 million in pre-tax interest expenses in a full year and $5 million for the remainder of its 2009 fiscal year to April.
Metcash said the hedge had been required by its banks for a loan in September 2005 to buy Foodland, a condition subsequently waived by the banks.
"Significant movements in interest rates recently and in particular the 1.75% drop in official rates in the last 6 weeks have materially altered the mark-to-market value of the collar. In view of this the Board of Metcash Limited has decided to terminate the instrument prematurely and avail itself of lower prevailing rates going forward.
"The cash cost to the Company of the termination is approximately $24 million and the charge to income disclosed as an abnormal item in the 2009 half year results will be approximately $17 million net of tax.
"Core earnings from trading remain unaffected by this action. At current interest rate and debt levels elimination of the collar will reduce pre-tax interest expense by approximately $12 million in a full year and approximately $5 million in the balance of the 2009 financial year.
"Absent the abnormal item and the expected reduction in interest expense, the Board confirms its EPS guidance for the 2009 year.
“Sales and trading remain strong and the Board anticipates no impact on its ability to pay dividends consistent with prior experience," directors said.
The shares were steady at $4.15
