Farm commodities supplier Olam said Monday it planned to raise up to $1.25 billion in a capital rights issue as its stepped up efforts to fend off a relentless attack by US-based research firm Muddy Waters.
Singapore's powerful state-linked investment firm Temasek Holdings, which is the second biggest shareholder in Olam, fully backed the exercise, Olam International chief executive Sunny Verghese told a news conference.
The rights issue will comprise of $750 million in bonds with a five-year maturity and a cash coupon rate of 6.75 percent, and warrants of up to $500 million.
Temasek "will undertake to subscribe" to its pro-rated entitlement of rights based on its 16 percent stake in Olam, Verghese said.
Temasek has however committed to take 100 percent of all issues not subscribed to by other shareholders, which would raise its stake to 29 percent, he added.
Olam's latest move follows a withering attack by short-seller Carson Block and his research firm Muddy Waters which questioned the company's allegedly flawed accounting standards that they claimed masked its debts.
Muddy Waters has predicted the Singapore-listed firm will collapse like US energy trader Enron, whose spectacular fall in 2001 was triggered by US government probes into its accounting practices.
The attacks have sent Olam's shares plunging since Block first made the allegations at an investment conference in London on November 19.
Olam shares have recouped some losses but were still down 9.5 percent from when the allegations were first made. Trading of the stock was suspended Monday pending the announcement.
"We are not doing this for liquidity, we already have the liquidity," Verghese said Monday.
"We are doing this to demonstrate... that we can access debt and capital markets at these rates today (and) we have a significant shareholder who is willing to backstop us and support us not with words but with action."
Temasek's commitment "is a very strong, decisive action (for investors) not to have any worries about any of the allegations".
Verghese on Friday bought one million Olam shares in the open market as part of efforts to boost shareholders' confidence.
On Monday, Verghese also rejected a call by Muddy Waters to have Olam rated by credit risk evaluator Standard and Poor's.
"It is not unusual that companies in our space have remained unrated for a long time... To make it as if we are the only unrated company is therefore completely wrong," Vergehese said.
Following Carson's remarks in London, Muddy Waters also released a scathing 133-page report supporting its allegations.
Olam fired-back with a 45-page rebuttal and a defamation suit.
Verghese last week also accused Muddy Waters of being a front for some hedge funds to drive down Olam shares in the hope of profiting from it later.
Short-sellers borrow shares and sell them in the hope their price will drop. They can then buy the shares back at a cheaper price and profit from the difference.
Muddy Waters' assessments of companies have been closely monitored, especially after a report in 2011 forced Chinese timber supplier Sino-Forest Corp to file for bankruptcy protection.