Indebted Australian waste services company Transpacific Industries, on a trading halt for the past 10 weeks, is expected to announce a capital-raising issue shortly, with speculation it will be seeking between $A800 million and $A1 billion ($NZ1.03 billion and $NZ1.27 billion) in coming weeks.
Transpacific specialises in landfill, liquid and hazardous waste management in Australia and New Zealand, and its subsidiaries include EnviroWaste around the South Island and Waste Management throughout New Zealand, this country's leading waste service provider.
The former "sharemarket darling" gained an NZX waiver 10-weeks ago to sort out its financial position, stemming from $A2.5 billion of debt taken on board with acquisitions, as speculation was mounting on its future prospects as a company, ABN Amro Craigs broker Peter McIntyre said.
"Transpacific's board drove an `acquisition-at-any-cost' agenda, both in Australia and New Zealand, leaving it with $A2.5 billion of debt," Mr McIntyre said.
Included in the spending spree was most of EnviroWaste's operations for $NZ63 million in 2007 and $NZ870 million spent in 2006 for Waste Management.
Mr McIntyre said there is widespread speculation across the Tasman, unconfirmed, that Transpacific would seek $800 million, but its debt levels suggested to him capital raising could exceed $A1 billion.
The capital raising format was likely be be either a heavily discounted share placement or renounceable (saleable) rights issue, likely the latter, Mr McIntyre said.
"But both could be at the expense of shareholders facing heavy dilution, if they decide not to buy in," he said.
While investors have had a "strong appetite" recently for companies underpinning balance sheets with issues, the market place was "becoming crowded".
"The question is whether investors still have any cash left. They are becoming more discerning and letting go [capital raising by] smaller, weaker companies," he said.
During the past year Transpacific's shares had traded at a high of $A8.28 to a $A1.71 low and at the trading halt its shares had "aggressively sold down" and ended at $A1.80, Mr McIntyre said.
Before hitting the debt wall, Transpacific was the ASX "darling" with good defensive earnings and cashflows, growth potential and it had the ability to generate electricity from its land waste operations.
"It's likely investors can forgive Transpacific's board for its acquisitions and look at taking up any offer," he said.
Transpacific's five business divisions are liquid and hazardous waste, solid waste, energy, industrial solutions and heavy duty commercial vehicles and parts.
EnviroWaste operates in Dunedin, Oamaru, Timaru, Christchurch, and Nelson.
• Mr McIntyre's financial disclosure document is available on request.
