AngloGold Ashanti was smashed yesterday as the company announced they were raising a whole lot of money to close out their hedge book.
The stock closed down nearly five percent, 4.88 percent down at 316 Rand a share. Because in the equity offering the placement is at ZAR308.37. They want to raise 686 million US Dollars in total. It is a lot more complicated than that, check this out from the announcement yesterday:
"AngloGold Ashanti announces the final terms of the offering of US$686,162,400 mandatory convertible subordinated bonds due 2013, which will initially be convertible into a maximum of 15,773,913 ADSs (and up to an additional US$102,924,350 principal amount of such bonds which will initially be convertible into a maximum of 2,366,087 ADSs pursuant to an over-allotment option granted to the underwriters) (the "Mandatory Convertible Bonds") by its wholly-owned subsidiary, AngloGold Ashanti Holdings Finance plc (the "Mandatory Convertible Bonds Offering"). The Mandatory Convertible Bonds are fully and unconditionally guaranteed by AngloGold Ashanti on a subordinated basis. The Mandatory Convertible Bonds will be convertible into ADSs (or, in certain circumstances, the cash value thereof), and pay a coupon of 6.00% per annum."
Now you are an expert. Sounds a little complicated. The company are going to apply to list these convertible bonds on the NYSE. These eventually will convert to ordinary shares. In the mean time they will pay out 6 percent per annum. But the most important takeaway that I have from this particular capital raising is that the South African shareholders that do not have money outside of borders and usable, you are going to struggle to participate. Call this whatever you want, but this sounds distinctly to me like once again companies are prejudicing local shareholders with the convertibles on this share register.
The big shareholders will not have this problem, they are of course thrilled and will no doubt participate. Check it out:
"We are steadfast supporters of AngloGold Ashanti's management team, its growth plans and its strategy of increasing its exposure to the gold price," John Paulson, President of Paulson & Co. Inc. said." Paulson (of subprime shorting fame) owns 12.1 percent of the shares.
"We support this move by AngloGold Ashanti in accordance with its strategy to remove the gold hedges" said Allan Gray Portfolio Manager, Sandy McGregor." Allan Gray owns 9.5 percent and collectively these two are the biggest shareholders.