ASX Ltd plans to raise up to $550 million in a two for 19 rights issue at $30 a share to in part fund new capital needed for the exchange’s clearing house.
The new capital is needed under international prudential rules to bolster the capital of these organisations because they will be taking on more business under the new European rules on clearing houses.
Clearing houses sit between buyer and seller of any security traded on the ASX (or other exchanges) – these include shares, options and other derivatives, commodities, and the just started Commonwealth Government bond market.
As well, clearing houses around the world, such as the one at the ASX, are due to start clearing so-called OTC (Over The Counter) products later this year in one of the biggest changes to trading since the GFC. That means currency and other swaps and derivatives will have to be traded on exchanges such as the ASX to improve transparency of pricing and ownership.
The issue price is at a substantial discount to the $35.84 the shares closed at last Friday ahead of the fundraising plans, which was announced before the market opened yesterday. ASX shares were suspended at the request of the company.
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The company will use $200 million to contribute additional equity to ASX Clear (Futures), the exchange’s clearing facility and central counterparty for securities listed on the ASX Trading platforms.
And the company said that ASX Clearing Corp’s $250 million of unsecured debt will be replaced with equity capital and the remaining funds used for future projects.
The two for 19 offer will be renounceable. The institutional offer started yesterday and will conclude on Thursday at 11 am (ASX shares should be on Friday morning) and the retail offer starts next Monday and will end on July 5.
The ASX said in the statement it expects that the investment of additional equity in ASX Clear (Futures) "will enable it to meet emerging international capital standards for central clearing counterparties, which are anticipated to be higher than previous standards.
"Investment in ASX’s clearing houses will provide Australia’s financial markets with a robust infrastructure and strengthen the position of ASX to compete on a global basis. Furthermore, the repayment of the debt facility will eliminate any potential refinancing risk."
It said that following the Entitlement Offer, "ASX will have no external debt facilities and the total equity capital contributed by ASX to its clearing houses will reach $700 million, including $250 million in ASX Clear and $450 million in ASX Clear (Futures).
"Currently, ASX Clear (Futures) participants contribute commitments of a further $120 million to the default fund. This will increase to approximately $200 million following the launch of the ASX clearing service for OTC derivatives targeted for late 2013.
"ASX expects that the target total capital commitments of $650 million will enable ASX Clear (Futures) to meet emerging international capital standards for central clearing counter parties."
ASX Chairman Rick Holliday-Smith said that "By increasing the level of equity capital in our futures clearing house, we expect to meet emerging international capital standards for central clearing counterparties which are anticipated to be higher than previous standards.
"Furthermore, by proactively increasing the level of equity capital, we are strengthening ASX’s position in the evolving clearing and exchange landscape."
And the ASX provided unaudited financial results for the 11 months to May 31. ASX said it expects "its FY2013 statutory and underlying net profit after tax to be approximately $346 million".
(That compares with the 2011-12 net profit of $339.2 million.)
"There will be no change to ASX’s existing policy to pay out 90% of underlying net profit after tax in dividends in respect of the FY2013 final dividend," the company said.
"Based on the expected underlying net profit after tax for 2H FY2013 and the expanded number of shares on issue, ASX expects to pay a FY2013 final dividend of approximately $0.81 per share." (85.1c a share for the previous year on the smaller capital).
"This guidance assumes no material change in market activity levels and no material counterparty defaults or other material adverse events in ASX’s business activities for the remainder of the financial year."
