Olam International Ltd.’s biggest shareholder said it will participate in a $1.25 billion sale of bonds and warrants, joining Singapore’s state-owned investment company in backing the offering.
“As the company’s largest shareholder, we fully support its proposed rights issue of bonds and warrants,” Kewalram Singapore Ltd., which owns 20 percent of Olam, said in an e-mailed statement yesterday. “We believe that it is in the best interest of the company, and is an attractive investment opportunity for all shareholders, as well as being beneficial to the bondholders. We intend to participate in the proposed rights issue.”
Olam, the commodity trader that short-seller Carson Block said might fail, said last week it will offer $750 million in bonds and as much as $500 million in warrants to address any “lingering doubts” about its liquidity. Singapore’s Temasek Holdings Pte, Olam’s second-largest shareholder, agreed to buy any rights not taken up by other investors.
Block, a 36-year-old former lawyer, first said on Nov. 19 that he was selling Olam shares short -- borrowing them to profit by buying them at a lower price later -- and that the company was at risk of collapse. Olam said it faces no risk of insolvency and sued the research firm and Block on Nov. 21 in the Singapore High Court, calling the comments malicious falsehoods.
Kewalram supports Olam’s strategy, it said. “The configuration of assets and capabilities that it has built up will generate enduring value for its stakeholders.”
Olam, the world’s second-biggest rice trader, has slumped about 15 percent since Block first made his allegations.
Olam will pay a 2 percent underwriting commission to banks managing the bond sale and the banks agreed to pay 0.85 percent of the principal amount of the bonds to a Temasek unit for sub-underwriting. The bonds and warrants are expected to be issued by late January or early February, it said last week.
Credit Suisse Group AG, DBS Bank Ltd., HSBC Holdings Plc and JPMorgan Chase & Co will manage the sale, Olam said in a statement Dec. 3.