Amid mudslinging, Olam receives full Temasek backing in $750m bonds issue

100% of issue sub-underwritten by Temasek.

Olam International has announced a renounceable underwritten rights issue comprising US$750 million 6.75% US$ denominated bonds due 2018 with 387,365,079 free warrants on shares of the Company, each Warrant carrying the right to subscribe for 1 new share in the Company. Upon listing, the Bonds and Warrants will become detachable and can be separately traded and held. Upon conversion of the Warrants, the Company will raise up to an incremental US$500 million of proceeds.

The announcement came as Olam continues to be embroiled in a vicious tussle with Carson Block and Muddy Waters, the pair of which accused the agribusiness giant of shoddy accounting practices. The resulting scandal has since sunk its share price as investors showed jitters. Influential shareholder Temasek in particular has seen around 25% of its wealth fund value eroded from their investment due to this Carson roadblock, according to Justin Harper, Market Strategist, IG Markets.

"The Transaction is a decisive action on the part of the Company to further enhance its liquidity position and underscores the Company’s ability to continue to access debt and equity capital even in current market conditions," said Olam

"The Company, as part of its ordinary course of business, proactively plans for an appropriate capital structure comprising both equity and debt to meet its investment plans. The approach involves determining the type of funding, the appropriate mix of debt and equity, and the nature and tenor of debt. The capital needs are constantly reassessed based on changing market conditions," Olam added.

Olam expressed confidence that "the Transaction is a strong endorsement from a long term strategic shareholder and further enhances the strength of the Company’s balance sheet. The Transaction will allow the Company to extend its debt maturity and liquidity profile, strengthen equity base and enhance capital structure and is not likely to have any impact on its net gearing levels."

All its equity shareholders can join the issue, which Olam views as "a unique and rewarding opportunity to participate in the long term growth of the Company."

The Transaction has the full backing and support of the Company’s key relationship banks including Credit Suisse, DBS, HSBC and J.P. Morgan who will underwrite this Transaction in full. 

"Further, Temasek has undertaken to take up their rights entitlement and have also committed to subscribe for all Bonds and Warrants that are not subscribed for under the Transaction, underlining Temasek’s support for Olam and the Company’s announced strategic plan," Olam said.

Olam’s Group Managing Director and CEO, Sunny Verghese said: “We are extremely pleased to announce this transaction that, we believe, will be very attractive to our continuing shareholders and bondholders. The clear action on the part of Temasek to sub-underwrite an issuance of securities by the Company is a resounding message of the support and confidence a discerning and sophisticated investor places in our Company, our strategy and the integrity of our management team. With this strong vote of confidence and support, we now move forward with a significantly enhanced balance sheet position and financial flexibility.”

For his part, Temasek’s Senior Managing Director, Investments, Mr David Heng, said: “We have invested in Olam over the years. We are supportive of its publicly known strategy to take the opportunity, in recent years, to add on more upstream and midstream capabilities and capacities. While no business is without risks, we remain comfortable with Olam’s credit position and longer term prospects, and are pleased to have another opportunity to invest in the company, alongside other shareholders."