Transport-infrastructure company Asciano Group has abandoned plans to sell some of its assets or itself, to private equity groups.
The debt ridden, struggling port and rail operator said yesterday that it is trying to raise a minimum of $2 billion through the issue of new stapled securities.
It’s almost as thought the company is refloating itself to the market, which it is if you think about the near death experiences it has had and the almost constant rumours of it going to the wall, unable to pay its way.
The group was born from Toll Holdings in a ‘clever’ attempt to ride the debt boom in 2007: it got the port and rail assets and most of the debt after the Patricks takeover, Toll got cash and lots of freedom to expand into Asia, without too much debt.
The credit crunch almost crippled Asciano, happening as it did two months after the company appeared in June 2007.
Now debt is out and Asciano says the proceeds of the underwritten equity raising will be applied primarily to the reduction of debt.
This is a company looking to escape a debt trap of its own making.
That means for the second time in around a year it has rejected approaches from private equity and other groups to sell some of its assets, or itself completely.
Asciano chief executive Mark Rowsthorn told reporters yesterday, according to AAP: "Effectively, this is the end. There will be no asset sales."
Asciano had been trying since last year sell all or part of its businesses to reduce its debt, which was close to $5 billion at the end of last month.
More than half that figure, or around $2.66 billion matures in the 2010 financial year; the company has little if any ability to raise more money from its current business, and had been looking to sell assets to raise the necessary cash. It had around $140 million (excluding cash on hand) in headroom on its loans at the end of May.
Asciano said yesterday the one-for-one rights offer is being sold at $1.10 a share. That would be a 40% discount to its last traded price of $1/83 last Friday.
"The decision to raise new equity was made only after considering the full range of factors,’ chairman Tim Poole said in the statement to the ASX.
"The board of Asciano believes that this transaction represents the best overall outcome for securityholders.
"It also provides the platform for Asciano to undertake a comprehensive restructuring of its capital base."
"The decision to issue new equity was made at the conclusion of a comprehensive and detailed process which provided Asciano with a range of monetisation and/or recapitalisation options.
"The Board of Asciano made the decision to undertake the issue of new equity following a rigorous assessment of the other available alternatives<" the company said.
The securities will be issued in four tranches – a 1-for-1 non-renounceable issue to existing security holders to raise $769 million; a $231 million placement with professional and sophisticated investors; a $1,000 million conditional placement also with sophisticated and professional investors; and up to $151 million through a conditional placement to key stakeholder and director Mark Rowsthorn.
"Mark Rowsthorn’s current intention is to take up his entitlement under the entitlement offer and to apply for up to $151 million worth of securities in the non-underwritten conditional placement to maintain his current 10.92% holding in Asciano, subject in each case to securing the required level of funding and in the case of the conditional placement, requisite securityholder approval being obtained," the company said.
Reducing the current level of debt would ensure the company complies with its banking covenants, reduces its refinancing requirements in the short to medium term and restores security-holder value, Asciano said.
Asciano also said it would not pay a final dividend for the 2009 financial year.
In updated guidance, Asciano said it expects earnings before interest, tax, depreciation and amortisation (EBITDA) to be three per cent higher, at approximately $655 million in fiscal 2009, ending on June 30, than in fiscal 2008.
The comment on trading in the 11 months to May was mixed.
"The key trends experienced across Asciano’s operating businesses and reported with Asciano’s third-quarter operating update have largely continued through the months of April and May 2009.
"Having seen a sharp decline in volumes across a number of non-bulk categories during the March quarter, reflecting both a slowing in the underlying economy and a substantial destocking cycle aimed at reducing inventories, some relative stability has returned to overall volumes during April and May.
“However, non-bulk (Intermodal, Container Ports, AutoCare, Steel) volumes have all remained below last year’s levels during the June quarter to date.
"Key bulk volumes (coal and grain rail, bulk stevedoring tonnes) have continued to trend above last year’s levels with no signs of any slowing of momentum during the current quarter."
In fiscal 2010, Asciano forecast EBITDA growth of between three and seven per cent, to between $675 million and $700 million.
"Asciano expects to achieve EBITDA growth (before significant items) in the range of 3% to 7% for the 2009/10 financial year, resulting in reported EBITDA in the range of $675 million to $700 million.
"This expectation reflects an as
