Olam (Muddy)

Olam: Muddy Waters responds to Olam's US$750m debt issuance. Says it validates its thesis that Olam is in danger of failing. Theorizes that Olam's banks told Temasek they would turn off the taps unless Temasek provided additional financing to the co. Recalls, only 4 days ago, CEO Mr Verghese vehemently insisted that it would not tap the mkts for at least 5 mths, and the 180 degree reversal supports its view that the co is in dire straits. Points out Olam's effective cost of this debt is likely over 10%, which should indicate this raise was not a luxury for Olam. Moreover proceeds are not intended for capex, but for working capital and to repay exisitng debt. Believes Olam's existing debt is much less expensive than this new debt. Adds, Olam has stated it will not accept Muddy Waters' offer to pay S&P to rate one of Olam's bonds. Questions if it is really fair to ask retail investors to increase their exposure to Olam while Olam is refusing to obtain a bond rating? Link to Muddy Waters note here, http://www.muddywatersresearch.com/wp-content/uploads/2012/11/MW_OLAM_12042012.pdf