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Masteel to raise up to RM107m from warrants issue

KUALA LUMPUR: Malaysia Steel Works (KL) Bhd (Masteel) has proposed a renounceable rights issue of up to 107.07 million five-year warrants at an indicative issue price of 20 sen each on the basis of one warrant for every two existing shares of 50 sen each held on an entitlement date to be determined later.

In a statement yesterday, Masteel said the maximum number of warrants to be issued was arrived at based on its paid-up capital of RM105.39 million comprising 210.79 million shares as at May 17, 2010 and assuming the full placement of another 3.35 million shares prior to the entitlement date.

It said the proposed warrants was expected to raise between RM21.1 million and RM21.4 million cash under the minimum and maximum scenarios respectively, which would be used for the group’s working capital.

Assuming the warrants were fully exercised, it would potentially raise an additional RM84.3 million to RM85.7 million cash for future repayment of borrowings and working capital.

Masteel said the indicative issue price was determined after taking into account the theoretical fair value of the warrants of about 41 sen each as at May 17, 2010, using the Black-Scholes option pricing model based on an indicative exercise price of 80 sen per warrant.

It said the indicative issue price represented a discount of about 51% from the theoretical fair value of the warrants, while the indicative exercise price took into account the five-day volume-weighted average market price of its shares up to May 17, 2010 of RM1.0116 per share.

Masteel said it would procure written irrevocable undertakings from certain substantial shareholders to subscribe for their entitlements in full. It expects to submit the applications to the authorities within two months and for the exercise to be completed by the end of the third quarter of the year.
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