PALADIN’S EQUITY FINANCING RAISES QUESTIONS
Paladin Energy (PDN-TSX) raised $69 million by placing 57M shares in an
institutional private placement at $1.22/share, or an 8% discount to the
previous day’s closing price.
The equity raise came as a bit of a surprise as the company is estimated to
currently have about $200M in cash. While Paladin is carrying US$817M in
debt, the first major payment of US$316M is not due until March 2013. The
raise comes on the back of a $127 million drawdown for its Kayelekera facility
in Malawi. Paladin is also looking to sell some of its non-producing assets to
free up further cash.
PDN shares have been lagging its producer peers and it is thought that this
move is an attempt to remove a “financing overhang” on the stock. That being
said, a move at this juncture with the uranium spot price trading at near its 2011
lows raises questions on the company’s confidence in its free cash flows and its
view of the uranium market in the near term.
Another theory is that Paladin may be looking to take advantage of the
numerous undervalued assets available in similar fashion to Cameco’s (CCOTSX)
hostile bid for Hathor Exploration (HAT-TSX). Paladin Chief Executive
officer John Borshoff has stated that, “the funds raised, will provide (Paladin
with) significant financial flexibility and a sound platform for the company to
achieve its corporate objectives.”