ALLENS ARTHUR ROBINSON advised Hutchison Telecommunications (Australia) Limited (HTAL) on the largest renounceable rights issue on the Australian capital markets to date.
The rights issue of convertible preference shares in HTAL to raise $2.85 billion was offered in March to all shareholders in HTAL with registered addresses in Australia and New Zealand.
On 5 June the company announced it had received valid applications for 7.85 billion of the 13.57 billion shares, with the underwriter, Hutchison Whampoa Limited (HWL) — which is already a major shareholder in HTAL — taking the remaining 5.72 billion.
Blake Dawson Waldron acted for HWL.
The proceeds of the rights issue will be used to retire some of HTAL’s debts and as working capital.
Allens said they had to use a creative and innovative structure to meet the requirements of a complex accounting treatment of hybrid financial instruments such as preference shares.
As the rights issue was also underwritten by a major shareholder in the company it raised some complex corporate issues, said one of the lead partners, Victoria Poole.
Prior to the rights issue, Hutchison Communications (Australia) Pty Ltd — a wholly-owned subsidiary of Hutchison Whampoa — owned 57.8 per cent of the issued capital of HTAL.
She said Allens’ ability to “call upon a range of experts across the firm enabled us to deal with a wide variety of complex issues”.
In addition, just prior to the issuing of the prospectus, she said there was an adverse draft ruling from the Australian Taxation Office following the High Court ruling in the McNeil case that the rights issued to shareholders would be considered taxable income.
Lonergan Edwards & Associates, the independent experts on the offer, were asked whether the draft ruling would alter their opinion. They said it was likely to have little effect as “any resulting tax liability, should the ATO treat market value of each entitlement as taxable income, is likely to be negligible relative to the listed market price of HTAL shares”.
The new shares were due to start trading on 13 June.