Yancoal’s proposed $2 billion capital raising — one of the largest carried out in Australia — is already facing hurdles despite being months away from coming to the market.
Fund managers and bankers have seemingly good memories and recall the miners’ disastrous attempt to raise nearly $3bn in a convertible note issue in 2014 as part of its proposed capital restructure and debt repayment to Yanzhou, its Chinese parent company.
Yancoal hit up Goldman Sachs, its former banker, first but was rejected at the time before it went knocking at UBS where it was also shown the door.
The company, however, found some love at Deutsche Bank, which agreed to carry out a note issue to raise the cash.
However, Hong Kong hedge fund Senrigan Capital was none too pleased and hauled Yancoal before the Takeovers Panel, which ruled against the Australian miner, which was found to not have put in place efforts to reduce the “control effect”.
Effectively, Yancoal was found to be favouring its parent company, which holds nearly 80 per cent.
There is also concern among local fund managers about the Chinese government control of Yancoal. The company is listed on the ASX but its close ties to Beijing and small free float of shares is a sticking point stopping Australian investors from piling in.
Yancoal has been advised on the $3.2bn acquisition of Rio Tinto’s Hunter Valley coal mines — effectively the old Coal and Allied assets — by JPMorgan and Morgan Stanley.
Rio Tinto is tipped to be close to offloading its Queensland metallurgical coal assets, Kestrel and Hail Creek in the Bowen Basin, as it looks to move out of the asset.
The deal means Rio has now netted more than $US7.7bn since it started its divestment program in 2013 as a means of alleviating pressure on its balance sheet.
Yancoal has been touted as a potential buyer but its firepower will be judged on the upcoming capital raising. Its been speculated that Yanzhou is going to contribute about $1bn to fund the rest of the acquisition.