Coronavirus: Asian companies seek emergency cash via rights issues to plug holes in balance sheets
- Companies from Singapore to India raises billions via rights issues
- Hong Kong-listed property developers, brokerages raise US$583.7 million from 10 rights issues in first four months of year
More listed Asian companies are turning to rights issues to see them through the coronavirus pandemic, as businesses across the region hit limits on rising debt.
“We see a lot of companies in Southeast Asia, India, engaging in measuring the impact of the pandemic on their liquidity positions, and consequently their need for capital” said Mrinal Parekh, head of Southeast Asia & India equity capital markets at BNP Paribas based in Singapore, adding he expects more deals to launch starting in July.
Companies saddled with debt, and whose businesses are greatly impacted by the virus are more likely to undertake rights issues, he said.
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A rights issue gives existing shareholders an equal opportunity to buy additional shares. It is often used by companies that are unable to raise new debt due to cash flow constraints at a time when majority shareholders are reluctant to be diluted further through share placements to new investors.