EQUITIES: Mazda taps for US$2.2bn
Carmaker Mazda has launched a 75% domestic, 25% international follow-on to raise ¥179.1bn (US$2.24bn), a third bigger than reports had indicated. Yet the stock actually gained some ground today inching up 1.38% to ¥147, having lost 10% on Tuesday when news of a smaller capital increase leaked.
The 1.219bn new share issue, including the greenshoe which is almost always exercised in Japanese offerings, will be 40.64% dilutive. The deal will price at a discount of 3%–5% to the close on the pricing date of March 5–8. SMBC Nikko, Nomura and JP Morgan are joint bookrunners. Goldman Sachs and Bank of America Merrill Lynch are also on the syndicate.
“Another risk is that Mazda may now decide to write down all of its deferred tax assets of ¥60bn ahead of the end of the fiscal year in March”
The fundraising is for capital investment in emerging markets, with equity financing needed for investment considering the company’s debt load and likely losses.
In the current year, Mazda faces ¥114bn in long-term debt and bond maturities, with another ¥81bn set to mature in the year starting in April, according to a Deutsche Bank research note. SMBC is the carmaker’s main bank with an exposure of ¥86bn as of the end of March 2011, followed by the state-owned Development Bank of Japan with ¥61.3bn.
The new share issue was announced at the same time as the closing of a ¥70bn, 60-year subordinated loan from a consortium of banks led by Sumitomo Mitsui Banking Corporation. The loan is rated BB+, and on review for downgrade, by Japanese rating agency R&I.
Mazda cut forecasts in early February, with a five-fold increase in its projected net loss to ¥100bn, and cut net sales by 5.1% to ¥2.05trn. Mazda can probably return to profit in 2013 if the yen holds at ¥80 against the US dollar. Koichi Sugimoto, senior analyst at BNP Paribas in Tokyo is forecasting a net loss of ¥21bn for 2013, assuming an exchange rate of ¥75 against the US dollar.
And this may not be the last of the bad news for shareholders. “Another risk is that Mazda may now decide to write down all of its deferred tax assets of ¥60bn ahead of the end of the fiscal year in March,” Sugimoto said.
The challenging numbers will make the deal more difficult, but the company will benefit from its strong brand which should help with retail demand, while the two-week bookbuild will give management time to convince institutional investors at roadshows.
Mazda last completed a capital increase in 2009 when it raised ¥93.5bn.
