Citic Resources Holdings, the oil and non-ferrous-metals arm of state-backed conglomerate Citic Group, plans to raise HK$2.5 billion through a rights shares issue to cut debt and fund future investments.
Despite major paper losses on its investment in Citic Resources, major shareholder Temasek Holdings, Singapore's sovereign wealth fund, has joined Citic Resources in committing to buy any rights shares not taken up by independent shareholders.
The Hong Kong main-board-listed firm yesterday said it aimed to sell 1.82 billion new shares at a ratio of three rights shares for every 20 existing ones. The price is set at HK$1.38 per share, a 25.8 per cent discount to the previous closing price. The stock sank 9.7 per cent to close at HK$1.68 after the announcement.
Citic Resources said the proceeds would improve the company's debt ratio, fund future investment and bolster working capital, but did not provide a breakdown.
This is the firm's second rights issue in three years. In June 2008, it also raised HK$2.5 billion. Then, it sold three rights shares for every 20 existing shares, at HK$3.20 each.
The proceeds of that issue were used the same way as the current rights issue is intended. Citic Resources said the new rights issue did not require independent shareholders' approval.
The company's net debt-to-equity ratio stood at 98 per cent at the end of last year. Assuming its debt and cash positions have not changed since, the share issue would see the ratio fall to 58.9 per cent, according to calculations by the Post.