Postby kaylex » June 3rd, 2014, 8:15 am
A phoenix rises
75M Phoenix Park shares on offer
By Asha Javeed
Story Updated: May 27, 2014 at 10:01 PM ECT )
There were several lessons to learn from the First Citizens Initial Public Offering (IPO) – there’s an investor hungry public, the need for good corporate governance and that there are loopholes in the country’s financial regulations which can be exploited.
Several people have paid the price for that lesson:
1.Former chief risk officer Philip Rahaman was fired from the bank after it was discovered that his purchase of 656,588 FIRST shares was an alleged front for his cousin, businessman Imtiaz Rahaman, his aunt Alia and several Rahaman-owned businesses.
2.Subhas Ramkhelawan, the broker for the deal through his company Bourse Securities, resigned as an Independent Senator and as chairman of the Trinidad and Tobago Stock Exchange.
3.Former chairman of First Citizens Nyree Alfonso resigned as well as director Rishi Badaaloo while two other directors Shobee Jacelon and Marlene Juman were voted out by the Corporation Sole.
Furthermore, there are still outstanding investigations by the Securities and Exchange Commission (SEC) and the Central Bank on that affair.
Out of that IPO, the sum generated of $1.046 billion was transferred to the Consolidated Fund.
But the Government is getting ready to give the IPO another go.
And has made some notable changes – the first being a cap of 5,000 shares that any employee or retiree can purchase in the employee bucket and the public is guaranteed a minimum of 1,000 shares each.
The TTNGL IPO
By July 21, it expects to offer shares of Phoenix Park Gas Processors Ltd (PPGPL) to the market through a subsidiary company of the National Gas Company (NGC) called Trinidad and Tobago NGL Ltd.
TTNGL will have two classes of shares – Class A, held by NGC of 38,700,000 and Class B shares being 116,100,000 of which 75,852,000 would be subject to the IPO.
There is a proviso that Class A shares could be later converted to Class B shares.
A fully subscribed IPO of 75,852,000 being issued at $25 a share would generate gross proceeds of $1.896 billion NGC will receive only net proceeds after the deduction of expenses and discounts for employees and retirees from the gross proceeds.
The Business Express last week obtained a Cabinet Note prepared by Minister of Finance and Economy Larry Howai on the impending IPO.
It was recommended that:
1.The Initial Public Offer would involve the sale of 65.3 per cent or 75,852,000 Class B shares of Trinidad and Tobago NGL Ltd,
2.The price of one (1) ordinary Class B share of the TTNGL would be $25.
3. The commencement date would be Monday July 21, 2014, the closing date for lodging applications would be Friday August 15, 2014 and the commencement date for trading will be September 22, 2014 and that those dates would be subject to variation by the Minister of Finance and the Economy.
4.The methodology for allocating shares from over-subscription would be in the context of the following guidelines and in descending order of priority:
a. each employee or retiree of NGC and its subsidiaries or affiliates would be given the right to buy a specified allocation up to the amount of 5,000 shares and the shares so purchased will be subject to a discount of ten per cent at offer price;
b.each employee or retiree of NGC and its subsidiaries or affiliates can purchase at the offer price any amount of shares in excess of 5,000 and those market-based purchases would compete with all purchases by the citizens of Trinidad and Tobago;
c.60 per cent of the total offer of 75,852 or 45,511,200 would represent a combined allocation for employees and retirees of NGC and its subsidiaries or affiliates and individuals who are nationals of Trinidad and Tobago; in other words, upon satisfaction of the applications by employees and retirees for discounted shares, additional requests by employees and retirees for market-based share purchases would compete with all applications from members of T&T’s public within the 60 per cent allocation bucket. Each individual other than an employee or retiree will be guaranteed up to 1,000 shares in their allocation;
d. 40 per cent of the total offer of 75,852,000 Class B shares or 30,340,000 Class B shares would be allocated in descending order of priority from:
• Mutual funds, including Unit Trust Corporation – ten per cent
•National Insurance Board (NIB)- ten per cent
•Pension Plans, Credit Unions and Cooperatives, Trust Funds, National Enterprises Limited – 15 per cent
•Other Companies- five per cent
5. Subsequent to the IPO, the NGC, the Class A shareholder, appoint three directors to the board of directors of Trinidad and Tobago NGL Ltd and that two independent directors be introduced onto the Board of Directors with nominees from the private sector: one from the Energy Chamber of Trinidad and Tobago and the other from the American Chamber of Trinidad and Tobago.
The $25 share price
At $25 a share, the market value of TTNGL which holds 39 per cent of the equity in PPGPL,
is $3.870 billion.
The market value of PPGPL at US$600 million or $3.870 billion is what NGC paid for the 39 per cent shareholding of Conoco Philips.
The $25 price assumed:
• projected lower net profit after taxes for PPGPL compared to historical results with the lower projections being primarily due to projected lower natural gas liquid content in gas-inlet streams;
•new investors in Class B shares having a non-controlling interest in TTNGL and PPGPL;
. new investors being provided with sufficient high returns to compensate for the higher risk of the energy sector compared to the other local sectors;
•Competitive pricing with other available assets on the Trinidad and Tobago Stock Exchange where the yield was approximately 4 per cent;
•affordability for individual investors.