Thoughts on Noble rights issue

Random thoughts on Noble rights issue:

- No vested interests
- Thoughts arose from a chat with fellow colleague
- Meant to give a quick summary and key considerations

Summary on Noble rights issue:
1) Key dates: exercise period - 5 July to 20 July (Wed)

2) Issue price: $0.11

3) Key terms: 1 for 1 rights issue; Renounceable. Fully underwritten. The Chairman, Mr Elman, has given an irrevocable undertaking to procure subscriptions for 625.5 million rights shares (representing 9.6 per cent of the maximum number of shares to be issued), although this is less than his full entitlement.

China Investment Corporation, the other key shareholder, has given a similar undertaking for 630.6 million rights shares (representing 9.6 per cent) which is its full entitlement. The remainder of the rights issue has been underwritten by a consortium of banks comprising HSBC, Morgan Stanley Asia, DBS Bank, Société Générale and ING.
4) Rationale. The Rights Issue has been proposed to form part of the Company’s ongoing and prudent balance sheet management and further enhance the financial flexibility of the Group.

5) Use of Proceeds. Gross proceeds approximately S$718.9 million. Estimated net proceeds approximately S$696.1 million.

The net proceeds:
20%:  debt repayment, working capital and general corporate purposes. The Company anticipates that approximately 20% of the net proceeds will be used for repayment of part of the Group’s syndicated loan facilities which are the Group’s 2013 term loan which matures in May 2017, the Group’s May 2015 revolving credit facility which matures in May 2018 and the Group’s May 2016 revolving credit facility (the proceeds of which were used to refinance existing borrowings) which matures in May 2017.

80%: working capital and general corporate purposes.

6) Considerations: 

Last traded (5 July):
Noble: $0.205
Noble R: $0.105

For existing shareholders who have been holding on to it before ex rights entitlement, you are entitled to subscribe to new Noble shares @ $0.11.

If you decide to subscribe to the rights: for example, if you bought 1,000 Noble shares @ $0.40, your average cost will be $0.255 per share as you would have invested a total of $5,100 of 2,000 Noble shares.

If you decide to sell the nil paid rights: based on last traded price at $0.105, you would potentially lower your cost of investment by $1,050 but the mother share is trading at $0.205 vs the lower cost of $0.295. Do note, the window period to trade the nil paid rights ends on 20 July.

Other considerations: Do note that for existing shareholders, you are entitled to apply for excess rights @ $0.11 per share and directly lower your cost of investments. Of course you have to have a sense of the outlook on the company.

Keep track of the market performance as you make your assessment.

Good luck!!

What is a rights issue:
You can go to the following website to get a quick summary on a rights issue: https://www.fool.sg/2013/06/23/what-is-a-rights-issue/