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Rubicon to raise $21m from 1-for-3 rights issue

Tuesday 5th June 2012

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Forestry science and wood products investor Rubicon said it plans a fully-underwritten one-for-three rights issue to raise $21 million.

As well as the rights issue, the company plans to extend its US$20 million bank debt facility through to July 1, 2014.

“The directors believe that the funding provided by the entitlement offer, together with the bank facility extension, will be sufficient to meet Rubicon's foreseeable needs out to early 2014, should that amount of time be necessary in order to bring value to our ArborGen and Tenon investments,” Rubicon said.

Rubicon owns 33 percent of the loss-making ArborGen, which is developing genetically modified trees such as eucalypts which can withstand extreme frosts or which grow much faster, and 59 percent of New Zealand-listed Tenon, which sells moulded wood products mainly in North America.

A planned float of ArborGen in the US last year had to be postponed because of adverse market conditions and Tenon, which reported a US$6 million net loss for the six months ended December 31, has been hit by the US housing market downturn. Rubicon reported a US$8 million net loss for the latest six months.

Rubicon said all directors and officers and major shareholder David M. Knott and associates, Rubicon's largest shareholder, who collectively own 31.2 percent, have agreed to take up their entitlements in full. First NZ Capital Securities is underwriting the share issue.

Rubicon foreshadowed ArborGen's need for further funding in its half-year report in February.

ArborGen is now planning a “liquidity event” in calendar 2013 which Rubicon said should mean no further funding for the tree company would be required.

Rubicon said, subject to an equity raising of at least US$12.5 million by June 30, 2013 as well as satisfactory progress towards an ArborGen float by July 1, 2014, its banker, ANZ National Bank, has agreed to extend the banking facility.

Rubicon said if there is a shortfall, those shares will be offered to shareholders and “selected investors” through a bookbuild process.

“Although it is more usually the case that a bookbuild would only allow institutional participation, this opportunity is also being offered to our eligible retail shareholders to ensure they receive a fair opportunity to acquire additional Rubicon shares at exactly the same bookbuild price bid by institutional investors,” the company said.

If the shortfall offer achieves a premium to the 22 cents per share rights issue price, it will be paid on a pro rata basis to ineligible shareholders and those shareholders who chose not to participate either in part or fully in the rights issue.

Rubicon was created out of a grab-bag of former Fletcher Challenge assets in 2001 and those assets were gradually whittled away to just the Tenon and ArborGen stakes.

Rubicon shares last traded at 39 cents on Friday, up from December's low at 30 cents but well shy of its high at $1.35 in March last year ahead of the ArborGen float being pulled.

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