JAKARTA. Financial Service Authority (FSA) is monitoring the plan of PT Evergreen Invesco Tbk to offer new shares through a pre-preemptive rights issue, on the grounds that the rights issue’s value may amount to rp 30 trillion with a 95.24% delusion effect.
At the same time, the plan for rights issue of GREN also related to the restructuring process of Asuransi Jiwa Bersama Bumiputera 1012 (AJBB). In this case, GREN is involving in the process through its subsidiary PT Pacific Multi Industri.
In the restructuring process, GREN will offer 93.88 billion new shares or 95.25% of the issued capital and paid up capital. To date, GREN has not yet set the exercise price and the ratio of the pre-emptive rights issue. However, GREN sees to raise a maximum of Rp 30 trillion funds from the rights issue.
The funds will be allocated to settle the GREN’s debts. The debts derived from the novation agreement between GREN with the subsidiary of AJBB, namely PT Bumiputera Sembilan Belas Dua Belas (B1912). The subsidiary was just recently established by AJBB to restructure the company, which will involve in insurance, property, and investment business.
B1912 will take over all of the debts, which amounted to Rp 23.5 trillion. AJBB itself has sold all of its shares in B1912 to the subsidiary of GREN, namely Pacific Multi Industri on the last 23 October. Automatically, GREN will take over all of debts of the company.
Under the novation agreement, GREN promises to settle the debts no later than 31 December 2016. Therefore, GREN sees to raise funds through rights issue. “Under the agreement, AJBB has agreed to become the stand by buyer of the shares, which are not taken by the corporate share holders,” said GREN management on a prospectus.
Actually, GREN planned to issue rights on 13 December 2016. However, GREN has not yet received the green light from the FSA, on the grounds that the institution remains cautious and is reviewing all required documents of GREN to issue rights. Understandably, if succeeded, the action will be the largest rights issue ever in the history of Indonesia’s stock market.
The stand by buyer
Chief Executive of the Stock Market Supervisor at the FSA Nurhaida said that the FSA will review the allocation of funds obtained from the rights issue. Nurhaida said that the FSA will trace the source of the debts. GREN itself is only a minor trade investment company with a total worth of Rp 1.5 trillion market capitalization.
However, Nurhaida said that the FSA will not limit the number of the new shares, as well as the value of the issuance, as long as GREN has completed the supporting documents for the rights issue.
Nurhaida said that GREN will issue the rights in order to acquire an insurance company, which a large amount of debts. However, FSA sees that GREN has not yet provided a comprehensive explanation in its prospectus, mainly in terms of the stand by buyer. The prospectus explained that the stand by buyer is AJBB and its subsidiary, namely PT Bumiputera Life Insurance (BLI).
The FSA is asking clarification related that issue to GREN. FSA will also ask the explanation related to the funds availability of the stand by buyer. Nurhaida said that the stock market rule stipulates that the funds may be deposit in a non-cash form. “For an example, whether there are bills that can be converted to shares,” she said.
FSA has already had clear policies related to the similar rights issue. In addition to the policies, FSA will ask opinion of the appointed public accountants.
However, one thing is for sure, the investors should be alert and monitor the corporate action. On Tuesday (22/11), the price of GREN shares dropped by 9.64% t Rp 300 per share.
Analyst at First Asia Capital David Nathanael Sutyanto suggested investors to make decision on the investment after having the clear prospectus, including in terms of stand by buyer. “The potential dilution and the benefit of the rights issue should be analyzed,” David said.
The rights issue may have positive value if the company may reap profits after issuing rights. He is optimistic that FSA will review the plan to get a clear stand point over the rights issue. David stressed that FSA will consider the funds availability of the stand by buyer. Therefore, without sufficient funds, the issuer will be banned by the FSA to issue rights.
(Muhammad Farid/Translator)
