ALLENS Arthur Robinson has acted for global steel manufacturer OneSteel in an accelerated non-renounceable rights issue.
OneSteel raised a total $878 million, including a $240 million fully underwritten institutional placement and a non-renounceable 2-for-5-entitlement offer. The entitlement comprises a full underwritten institutional component of $319, and a non-underwritten retail component worth a further $319 million.
Transaction costs have been estimated at $17 million, of which the underwriter UBS, represented by Mallesons Stephen Jaques, will receive a large portion, Business Spectator reports.
At Allens, M&A partners Vijay Cugati, Tom Story and Andrew Finch are leading the brief. At Mallesons, Dave Friedlander, Mark Bryant and Amanda Isouard are advising the underwriters.
Allens has been involved in some significant capital raisings this year, including Westfarmers’ $4.6 billion equity capital raising and the Qantas $500 million capital raising.
The firm’s relationship with OneSteel began when it advised the company on the $2.2 billion acquisition of Smorgan Steel in 2007, which Finch also worked on. The firm’s M&A team also worked on the BHP’s merger with Billiton soon after it spun off OneSteel.
OneSteel has said it would use funds raised to pay off debt due before 2011, and to reduce gearing closer to 30 per cent.
“We are very grateful for the opportunity to assist OneSteel in its important step in responding to the very challenging market conditions arising from the global financial crisis,” Cugati said.
Allens partner Cugati said the firm had faced a “testing timeframe” to get the deal away, but worked closely with the company's senior management team to deliver a strong case for OneSteel’s business.
Two months ago OneSteel was predicting a profit of between $325 million and $375 million for this year, but yesterday it wiped at least $125 million from that guidance when it revised its Net Operating Profit After Tax Guidance for the 2009 financial year to around $200 million.
The revised earnings guidance reflects “significantly lower than anticipated” sales and margins in March, the company said.
OneSteel blames falling iron ore prices since February this year, as well as lower domestic demand due to customer destocking for the revised earnings guidance.
On top of this, “both domestic and international market conditions have become a lot tougher than anticipated”, Geoff Plummer, OneSteel managing director said yesterday.
“The earnings downgrade is disappointing and what we have seen is a rapid and significant deterioration in the market environment.”
The company said in a trading update to investors that its expectations for recovery by the final quarter of this year are now lower than they were.
It predicts, however, that things will improve in 2009-10 due to its cost-cutting, the long term benefits of its merger with Smorgan Steel, and lower financing costs, as well as higher production as it clears its excess inventories.