United Envirotech: enters into purchase agreement with KKR for the proposed issue of US$113.8m in 5-yr convertible bonds. The bonds pay 2.5% pa, and come with a conversion price of $0.45/sh (28.6% above last traded at $0.35). If fully converted, the CBs will make up 38.4% of the expanded share base.
At least 90% of the proceeds will be used to fund its Transfer-Operate-Transfer (TOT), Build-Operate-Transfer (BOT) and Build Own and Operate (BOO) projects, with the remainder used for working capital.
The agreement is subject to sh/h approval. Nevertheless expect positive reaction to the stock. In the wake of the recent corporate governance concerns surrounding the S Chips, KKR’s investment may be seen as a vote of confidence in the co.
Stirling Coleman is the arranger for the transaction, Credit Suisse is advising KKR.
Stock trades at 10.6x P/E.
DMG, OCBC had Buy ratings with TP of $0.53/0.54, last updated in May.
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