Olam announced a renounceable bonds cum warrants right issue. It will offer 313 bonds at US$1 and 162 warrants with a execrcisable price of US$1.291 for every 1000 shares. The warrants are not exercisable fo the first three years. The bonds mature in 2018 and carry a interest rate of 6.75% with an initial issue price of 95%. Most importantly, Temasek undertake to take up 100% of any unsubscribed rights.
This means that olam will raise immediately US$750m in bond with a further US$500m if and when warrants are converted.
This exercise make Muddy Water offer to get Olam Debt rated meaningless as Olam can raise debt in double quick time even in time of stress. It also show that Olam has the 100% backing of Temasek.
For small shareholders, even if you do not take up the rights, it will not hurt you at this stage as the warrants are priced at $1.575 which is the current price. However, you may miss up on the upside later on.
By leveraging on Temasek, Olam share and bond price will be supported and shortist will most likely leave the market quietly. What is left for Olam is execution, execution and still execution.