Published February 26, 2009

DBS sees more firms issuing rights shares

By EMILYN YAP

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BARELY two months into the new year, half a dozen Singapore-listed companies have announced rights issues and more could do so in the next few months.

'In the current environment, while credit is tight, companies need to strengthen their balance sheets,' said DBS managing director and head of equity capital markets Kan Shik Lum. Some also need to 'raise equity to bring down gearing before bankers lend them money'.

Mr Kan was speaking at a press briefing on Tuesday.

According to data from DBS, OSIM International, Craft Print International and several property businesses have put out cash calls of over $3 billion to the market since the start of this year. One of the largest is CapitaLand's which may raise up to $1.84 billion in gross proceeds, and DBS is one of the lead managers and underwriters. In contrast, just two companies announced rights issues in the same period last year and one deal was eventually aborted.

'I envisage that more companies will come forward to raise funds by way of a rights issue,' said Mr Kan.

DBS itself recently completed a rights issue and raised around $4 billion. There were more than 26,000 applications for the rights shares, of which 30 per cent, or over 8,000, were manual ones which the Central Depository had to process.

Large numbers of manual applications can create a 'bottleneck', said Mr Kan. Issuers may also take a longer time to find out how the response was.

CapitaLand and DBS hope that more investors would use ATMs belonging to DBS, OCBC Bank or United Overseas Bank to apply for the rights shares which open for subscription today. It is also cheaper and more convenient for shareholders to subscribe through ATMs, said Mr Kan.