Raffles Education makes $30.5m share placement

RAFFLES Education Corporation (REC) has placed out $30.5 million worth of new shares. The education services provider will issue 80 million shares at 38.1 cents apiece and said that the placement yesterday was 'comfortably oversubscribed'.

The price was a near 10 per cent discount to the stock's average traded price of 42.3 cents on Tuesday.

The shares were placed with institutional and other investors 'outside Singapore', as well as existing shareholders.

REC's substantial shareholders include Singapore's FIL Investment Management, which owns about 8 per cent of the company.

Nomura Singapore was the placement agent. BT understands that senior banker Patrick Lee from Nomura was in charge of the deal.

To 'facilitate the placement', REC said that its chief executive Chew Hua Seng had agreed to lend up to 80 million shares to Nomura for delivery to placees. The shares will be returned to Mr Chew five business days after completion of the placement.

All of the funds will be used to repay loans, which REC said it had drawn for acquisitions and as working capital.

It said that the move would reduce net debt about 20 per cent and lower its net gearing.

Based on REC's financial statements for the half-year ended Dec 31, net debt comes to $130 million.

An analyst said that the share placement would allay some fears in the market over REC's short-term borrowings.

'With the credit tightening, there was a lot of concern whether Raffles Education's high short-term borrowing would pose a problem,' he said.

He expects part of the funds to be used to repay short-term loans of $164 million. 'They are looking to bring the gearing back to zero,' he said.

REC said that its debt-to-equity ratio was 0.23 times at end-2008. Its biggest buy so far is the $392 million acquisition in 2007 of campus operator Oriental University City in Hebei, China.

Two weeks ago, Oriental Century, which is 29.9 per cent owned by the Raffles Education group, said that its chairman and CEO Wang Yuean had admitted inflating sales and cash figures.

When asked if any of the placement proceeds would be channelled to Oriental Century - a $34.6 million investment - the company merely reiterated that the money would be 'fully used' to repay banking facilities.

The analyst thinks that the fund-raising was not triggered by the fraud case, as any write-off would be a non-cash item.

REC shares fell one cent yesterday to close at 39.5 cents.


Source :Business Times