Olam International's bond sale only 'delays collapse', says Carson Block
Carson Block, the lawyer being sued by the commodity trader, maintains its demise is nigh
Olam International's planned US$1.25 billion raising will only postpone the likely collapse of the commodity trader, according to Muddy Waters, the research firm led by short-seller Carson Block.
The sale of a record US$750 million in bonds and as much as $500 million of warrants announced on Monday "validates our thesis that Olam is in danger of failing", Muddy Waters said. The statement was in a response to the raising that's backed by Temasek Holdings, Singapore's state investment company.
Olam, the world's second-largest rice trader, and Muddy Waters have engaged in a public war of words since Block, a 36-year-old former lawyer, last month said he was selling Olam shares short.
Olam chief executive Sunny Verghese, who sued both the research firm and Block on November 21 in the Singapore High Court, described the sale as a vote of confidence from Temasek that demonstrated its ability to get funding.
"More than anything, this move is to give comfort to the market, to get that confidence back up," said Tanuj Shori, a Nomura Holdings analyst. "This issue may take time to resolve because it is too subjective."
Shares of Olam, also one of the world's three largest coffee traders, climbed up 8.6 per cent to S$1.71 (HK$10.88) in Singapore yesterday, trimming its decline since Block made his allegations on November 19.
The price of US$500 million of its 5.75 per cent bonds due in September 2017 dropped 2 US cents to 89 US cents on the dollar after rebounding 7.5 US cents yesterday, according to BNP Paribas prices.