Tuesday 17th June 2003
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Tower, which the consultancy firm's report reveals is under-capitalised as a result of operating losses and write-downs, will issue GPG with shares at a significant 35% discount to last week's $1.54 share price.
According to the report, the deal will raise $202.9 million for Tower and is likely to see GPG take a 30-35% stake in the company, though Grant Samuel notes that GPG will not move to increase its representation on the Tower board beyond its existing two board members.
However, the proposal is dependent on the outcome of an extraordinary shareholder meeting on July 4, as Tower's constitution requires amending in order for the deal to be legally conducted - primarily the need to increase the 10% existing shareholding limit in order to accommodate the new issuance.
Grant Samuel believes the deal is important for Tower given "its bankers have become increasingly inflexible in considering any restructuring of Tower's current debt, and financial restructuring is now essential to its future".
Despite the proposal though, the consultancy group notes that an important question for Tower shareholders to consider before voting on the issue is whether the anticipated $202.9 million will in fact be sufficient to meet the company's debt obligations and provide a suitable platform for future growth.
However both the board and management of Tower believe that the proposal together with a new senior debt facility, use of internal surplus funds and possible asset sales will provide sufficient funds to meet its immediate debt repayment objectives and stabilise the business.
GPG is also underwriter to the rights issue.
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