Lonmin $400m rights offer under-subscribed

[miningmx.com] – LONMIN had instructed its supporting banks to place just under $120m worth of heavily discounted shares in the company with buyers in the open market after its $400m rights offer was under-subscribed.

The struggling platinum miner announced today that roughly 70% of shareholders had subscribed to the rights offer in which shares were issued at 21.4 cents/share equating to a 94% discount to its share price at the time the offer was made public.

HSBC, JP Morgan Cazenove and Standard Bank will now seek to place the balancing 7,847,160,972 shares with investors which, if they cannot be found, will be bought by the banks themselves as per the under-writing agreement.

The under-subscription provides some insight into how unpopular the rights issue was with shareholders who felt they had no option but to support it.

“We had no choice but to vote in favour because we will be wiped out if this doesn’t go through,” Anthony Guildford, a Lonmin investor since 1969, told Reuters in November.

“But does that mean we will be with the company in the next 10 or even two years? We don’t know,” he said.

Investec Securities said the size of non-subscribers was instructive. “This appears to suggest that shareholders are contributing $283m with underwriters likely having to cover the remainder.

“Furthermore the sizeable proportion of shareholders not following the majorly dilutive issue is saying something”.

The rights offer paves the way for the re-schedulding of some $370m of debt in Lonmin to 2020 compared to 2016. It also effectively gives the approval to Lonmin’s business plan which it said would see it generate cash even at the current price of platinum.

Lonmin added today that some 617,581,491 shares in the company would be placed with the Bapo ba Mogale, in order to preserve the shareholding of the platinum firm’s empowerment partner at some 2.2% in the company. Lonmin’s other empowerment partners own shares through asset-level vehicles.

Applications had also been made to undertake a 100:1 consolidation of Lonmin shares given the sheer scale of the dilution caused by the rights offer. Lonmin would trade post consolidation on December 18, the company said.