Investors' confidence in Nuplex share rate

Nuplex Group managing director John Hirst. Photo / Dean Purcell

After its initial battering, Nuplex has received a vote of confidence from institutional investors who agreed to pay more for the rights to buy shares in its controversial top-up placement.

The resins maker yesterday went on an unexpected trading halt before telling the market it had raised $26.7 million from institutional and habitual investors.

The top-up had been expected to garner a maximum of $22.7 million from institutions but was $4 million higher after deal underwriters, First NZ Capital, negotiated a rise in the issue price from 23c to 27c.

Market commentator Arthur Lim said the extra $4 million was an inconsequential amount but the price rise was significant.

"For First NZ Capital and Nuplex to be able to extract an extra 4c out of the placement is significant."

Lim said the entire rights issue process had been viewed as controversial and that had impacted on the reputation of Nuplex and First NZ.

"There was a perception that the institutions were getting a very good deal."

But Lim said it appeared the institutions had accepted they would have to pay more and that was good news for the long-term future of Nuplex.

"To me it speaks volumes that the institutions they have attracted to the register appear to be committed to the longer term rather than buying it for a quick flick.

"The fact they have agreed to a higher price means they see much more value in the company."

The top-up was a condition of Nuplex's capital raising deal with First NZ in which the underwriter had the option to sell up to 15 per cent or 99 million extra shares to institutions.

The option ensured that institutions had some certainty over the shares available to them, as under the rights issue it depended on the level of rights taken up by shareholders.

The $26.7 million adds to the $132.8 million already raised from existing shareholders in its seven-for-one rights issue. The issue had a high take-up with only 4.09 per cent in undersubscriptions which was taken up by First NZ for $5.4 million.

First NZ investment banking head Rob Hamilton said demand had allowed it to negotiate a better price with the institutions after the rights issue take-up was higher than expected.

"The institutions obviously didn't get the shareholding they thought they might so there was keen demand for the top-up."

Hamilton said it had said to Nuplex that a higher price would allow it reduce the top-up but the company had opted to have more money and allow it to be fully taken up.

Those who had taken up the offer included most of the major New Zealand institutions, he said.

Nuplex Group managing director John Hirst said the result had been very pleasing.

"We were positive all the way through, some of the punters didn't think so but we were always positive."

Hirst said the company would use the capital raised to pay off the A$50 million owed to Citigroup before November.

The remaining money would give the company flexibility in the challenging economic times and should an acquisition opportunity arise it would also mean the company had very strong balance sheets, Hirst said.

Nuplex was forced to raise capital by its bankers after it breached a senior debt cover ratio due to a drop in demand for its products and a rise in debt levels as a result of a drop in the New Zealand dollar.

Nuplex shares closed up 1c on 34c, down from a year high of $6.46.

CAPITAL INJECTION
* $132.8 million raised from shareholders.
* $26.7 million raised from institutions.
* $159.5 million in total to be used to pay down debt.