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Rabu, 30 Juli 2008

Brave Aussie firms can still raise capital, at a price

Tue Jul 29 23:33:50 PDT 2008

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By Denny Thomas

SYDNEY, July 30 (Reuters) - Australian mining services companies should find it relatively easy to raise equity capital to fund acquisitions despite turbulent stock markets and less-than enthusiastic support for Orica Ltd's recent A$900 million ($865 million) rights offer.

But even firms linked to the booming mining sector may need to offer sweeter terms to win investors' backing, and highly geared property trusts and toll road operators will likely need the support of cornerstone investors to meet their capital needs as worries about the global credit crisis persist.

"If you like the story you are inclined to participate," said Ross Barker, managing director of Australian Investment Co, which oversees about A$5.1 billion.

"Just because market is volatile, doesn't mean you are not looking at good opportunities," Barker said, adding that mining services companies would find it easier to convince investors as they have performed better relative to the rest of the stock market.

Still, bankers say selling shares now is not for the faint hearted, adding that companies will likely need to come up with better terms or more innovative offers to lure investors, which will cost them more to raise the capital in the long run.

Three Australian banks - Westpac Banking Corp , Suncorp Metway Ltd and Macquarie Group Ltd -- have together raised A$2.3 billion by issuing securities that offer regular distributions and carry an option of converting into shares.

Speculation is rife that fertiliser maker Incitec Pivot Ltd , contractor Leighton Holdings Ltd and ports operator Asciano Group are looking to raise money to fund acquisitions or to pay down debt.

Though all are in sectors with strong growth prospects, the mere talk of fund raising has pulled down their shares, underscoring market nervousness about new capital raisings.

"Not many investors are willing to put new money into companies unless they have a very good story, a very good management team and almost a risk-free plan for using the money. And there aren't many of those around," one banker at an independent corporate advisory firm, said. He declined to be named as he was not authorised to speak to media.

With the benchmark S&P/ASX 200 index <.AXJO> down about 22 percent this year, the cost of raising equity has already risen, but firms with clear goals, such as financing for known acquisitions, will find it easier to raise money.

"If you had a choice you would not be raising equity today unless you had a very good reason for doing so," said Wayne Kent, executive director of Macquarie Capital Advisers, a Macquarie Group unit.

Earlier this year, conglomerate Wesfarmers Ltd and Primary Health Care Ltd together raised nearly A$4 billion, braving the downturn in equity markets. But both moves were related to previously announced acquisitions.

But Orica, the world's top explosives maker, found only 70 percent of the shares available under its offer were taken up, despite its exposure to the booming mining sector. Credit Suisse described its capital raising as rushed and opportunistic.

"You can argue there was no defined plan for the raising," said Matt Williams, a fund manager with Perpetual Ltd, Orica top institutional shareholder.

"It was a very broad guidance...," he said. Orica shares fell 13 percent as trading resumed after the institutional offer.

For bruised property companies, raising funds is crucial for survival, but with fallout from the U.S. subprime mortgage crisis still mounting, investors are likely to give them a wide berth.

Fund managers say the only way property companies may be able to win back investors is if they find a strategic or cornerstone investor, such as a highly respected regional or global firm, to anchor the transaction and boost confidence in a new share issue.

Property investor Australand Property Group launched a rights issue of up to A$557 million earlier this week, which follows a capital infusion into toll road operator Transurban Group Ltd . In both cases, the funds were injected by strategic investors as opposed to institutional investors.

"Three types of capital will be raised this time around. One is M&A funding, which would be well received," said one equity capital market banker at a foreign bank.

"Then there will be rescue refinancing, and third will be companies who do small opportunistic raisings, and I think people will not be very happy with them," he added. The banker declined to be named as he was not authorised to speak to media.

Major equity capital raisings by Australian companies in 2008

COMPANY AMOUNT Primary Health Care Ltd A$1.2 billion Wesfarmers Ltd A$2.5 billion *Orica Ltd A$900 million Transurban Group Ltd A$1 billion (* Offer still in progress) ($1=A$1.05) (Editing by Kim Coghill) (

(denny.thomas@reuters.com; +61 2 9373 1812; Reuters Messaging: denny.thomas.reuters.com@reuters.net))

http://news.alibaba.com/139289_Oceania/329480/

Brave_Aussie_Firms_Can_Still.htm


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