Olam

Olam: Ex-Morgan Stanley regional CEO and ex-senior MD of Temasek, Michael Dee, highlights the recent 70% drop in rights px reflects significant imbalance of excess supply/limited demand. The core issue remains that Olam’s finances are far too opaque, key questions are still unanswered, and sh/h do not want or cannot own the debt or disagree with px offered. Points out, that the rights px fell to below the warrants expected value is most likely due to concern that bond px is too high. Notes the US$750m bond is very large, equal to 25% of Olam's mkt cap; and this, along with its billions in outstanding debt, remains unrated. Questions why "underwriters" won't take any risk w/o having Temasek stand behind them for a $7.8m fee. Adds, Temasek should not be relied upon as a backstop against bad mgmt decisions. A few yrs ago, ABC Learning went bankrupt only mths after Temasek made a substantial investment. Another issue remains is how many of mgmt's shs are on margin/ pledged/ encumbered, something which mgmt has explicitly refused to even discuss. Highlights the ultimate end game remains uncertain as $125m of dividends and continued negative cash flow are funded with ever increasing amts of debt.