TTA plans to raise more than Bt6 bn through RO

TTA expects to raise up to Bt3.96 billion in immediate funds from the RO, and up to Bt2.4 billion over the next two and a half years from the exercise of warrants, for a combined total of up to Bt6.37 billion.

The key uses of the new capital include Thoresen Shipping’s |fleet-expansion plan through |the purchase of new and second-hand vessels and potential re-newal of the drilling-rig fleet at Mermaid Maritime, a TTA subsidiary providing offshore oil and gas services.

All shareholders will be entitled to exercise their rights by subscribing to two newly issued shares at a price of Bt14 per share for every five existing shares they own. Free warrants will be issued only to those shareholders who subscribe for new shares at a ratio of one warrant to two newly subscribed shares. Each warrant can be converted into one common share at an exercise price of Bt17 within 30 months of the warrant issuance.

The subscription period for the RO is February 21-28.

Unsubscribed shares will be allocated to shareholders who subscribe to excess rights at the same price of Bt14 per share and up to a limit of 0.5 time their current holdings. Any remaining shares after the distribution of excess rights may be allocated to a private placement in one or several tranches.

The capital-increase proposal is subject to shareholder approval at TTA’s annual general meeting of shareholders, which will be held on January 30.

The company’s president and chief executive officer, ML Chandchutha Chandratat, said funds raised via the RO would be allocated towards its strategic investment priorities, namely dry bulk shipping and offshore oil and gas services.

Meanwhile, capital raised through warrants will likely come over the course of the next two and a half years, allowing TTA to fund the completion of new-build assets that can be locked in at relatively lower prices by ordering now, as the majority of payments are typically due upon completion.

The company vows to use a combination of equity and debt to fund its asset purchases, balancing its loan covenants with its growth objectives.

Supramax vessel

In 2008, a five-year-old Supramax vessel traded above US$70 million, while the average price over the past 10 years has stood at around $30 million. TTA says there are opportunities to pick up high-quality, modern, efficient second-hand vessels for less than $20 million (Bt613 million).

Likewise for new-build Supramax vessels, the price now stands at between $24 million and $27 million, roughly 20 per cent cheaper than the average price of a new-build over the past 10 years.

As freight rates remain low during the next 10-12 months, asset prices are expected to decrease even further and bottom out in 2013 before a gradual pick-up in 2014.

The offshore oil and gas services sector has entered a cyclical upturn, with utilisation rates for modern tender drilling and jack-|up rigs reaching approximately |95 per cent. To maintain its ability to participate in this segment, Mermaid may decide to renew its asset base. Its two main drilling assets are approaching the end of their useful lives, and there are no realistic second-hand purchase opportunities.

A new-build tender drilling rig can be constructed for $120 million to $130 million, with delivery approximately two years thereafter.