August 30, 2017 Read More →

Sign of the Times: Yancoal Gets Few Takers

The Australian:

Yancoal Australia’s $US2.35 billion ($3bn) equity raising has met with next to no interest from institutional and retail shareholders, leaving its underwriters and Chinese backers on the hook for almost the entire amount.

Yancoal, which needed the cash to complete its acquisition of Rio Tinto’s Coal & Allied business in NSW, only attracted $US4 million worth of applications from its existing non-Chinese share register while institutional investors applied for just $US59m of the more than $US1.3bn in entitlements up for offer under a bookbuild at the weekend.

The weak appetite means Yancoal’s existing major shareholder, Chinese state-owned group Yanzhou Coal Mining Company, will take up the full $US1bn in new shares to which it had committed while the bookbuild’s underwriters — China Shandong Investment, Cinda International and Glencore — will take up the remaining $US1.28bn.

While there was an expectation going into the raising that Yancoal would have to rely on its underwriters for much of the funding, the response was nevertheless weaker than expected.

The flat investor response to the raising has been blamed on a confluence of factors, including Yancoal’s poor record of performance in Australia (it has recorded four straight years of losses totalling more than $1.6bn), the dominant position held on Yancoal’s share register by Chinese interests, and the broader softening of investor interest in coal generally.

The raising also took place at a time when many investors are tipping a fall in coal prices following a strong 12 months for the commodity.

In one potential sign that the coal market may be nearing a peak, veteran coal investor Tony Haggarty yesterday revealed he had just sold almost 2 million shares in coal producer Whitehaven Coal for $6.4m, cashing out a portion of his holdings at a time when Whitehaven shares are at their highest level since 2013.

Coal heavyweight Glencore, which is helping fund the Yancoal acquisition, yesterday announced it was putting up for sale its Rolleston thermal coalmine in Queensland. The sale process for the mine, which produced 13.3 million tonnes of saleable coal in 2016, is being handled by Merrill Lynch.

Contango Asset Management managing director George Boubouras told The Australian the combination of Yancoal’s China-heavy share register and the wider shift away from coal among many investors were probably to blame for the weak uptake.

More: Yancoal’s $3bn equity raising shunned by investors

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