NOL plans $972 mln rights to cut debt, build warchest
Neptune Orient Lines (NOL) , the world's seventh-largest container shipping firm, will raise S$1.4 billion ($972 million) through a rights issue to repay debt and build a warchest for possible acquisitions. The issue is backed by Singapore state investor Temasek , which will subscribe for its 67.4 percent entitlement as well as buy up shares not taken up by minority holders. NOL shares rose as much as 17 percent to their highest in nearly 8 months as investors welcomed the strong support from the majority shareholder and shrugged off analysts' "sell" recommendations. "NOL's proactive capital raising will strengthen its balance sheet, enhance its financial flexibility and allow it to seize investment opportunities," Temasek Managing Director for Investments Ong Beng Teck said in a statement. NOL, whose fortunes are tied to the global economy, suffered a bigger-than-expected loss in the first quarter following a slump in cargo volumes, and most analysts do not expect the firm to be profitable until early next year. "We continue to believe the container sector faces a protracted downcycle," said UBS, which reiterated a "sell" call on NOL. The Swiss bank said there appears to be some stabilisation in global container volumes, but rates remain under pressure on most trade lanes. Temasek has been supporting rights issues by a number of its subsidiaries, including Standard Chartered, Southeast Asia's biggest bank DBS, and property group Capitaland . NOL, which is offering shareholders 3 shares for every 4 held at S$1.30 each, said it will use about half the proceeds to repay debt. The balance will be for working capital as well as possible investments in businesses related to container shipping and logistics, Chairman Cheng Wai Keung said at a media briefing. PREVIOUS DENIAL Cheng also said market conditions were conducive for a rights issue following the recent stock market rally that boosted NOL's share price from a low of S$0.85 in early March. NOL had denied market speculation in March that it was planning a rights issue, at a time when a number of Temasek-backed firms were selling shares to bolster capital. Minority shareholders who wish to subscribe for additional shares will have priority over Temasek, NOL said, adding its directors will take up their rights entitlement except for CEO Ron Widdows "who has other financial commitments". After the rights issue, which is being managed by DBS, NOL's net debt or gearing will be "close to zero". NOL's flagship APL unit competes against the world's biggest container shipping line, owned by Danish group A.P. Moeller-Maersk, and China Shipping Container Lines . Looking ahead, Widdows told reporters that container rates were still volatile but "volumes have certainly stabilised and have begun to move up". NOL last week said it carried 22 percent fewer containers in the four weeks to May 1 from a year ago. NOL has shed 9 percent of its workforce, or 1,000 jobs, cut capacity in Asia-Europe trade by about a quarter and in trans-Pacific trade by 20 percent.