Key to raise $670m in rights issue
Published:Friday | December 18, 2020 | 12:19 AM
Key Insurance Company Limited will seek to raise $670 million in a rights issue, which will open for subscription by existing shareholders two days before Christmas.
The offer is being brokered by GK Capital Management, which, like Key, is owned by the GraceKennedy onglomerate.
Key will issue some 190 million new shares at $3.50 each, which is less than half the stock’s closing price of $8.38 on Wednesday. The issue opens on December 23 and closes just under three weeks later on January 11. Full take-up of the offer would increase the number of issued Key shares from 368 million to 559.3 million.
“The rights issue will be critical to the implementation of Key’s vision and strategic plan, which focuses on achieving profitability targets and sustainable long-term growth,” said Chairman Don Wehby.
GraceKennedy took over Key at the top of this year, at a time when the entity was in financial worries and needed an injection of capital – which the rights issue is meant to address. The conglomerate holds a 65 per cent interest in Key Insurance.
The rights issue is one component of the overall strategy implemented by the new board installed under GK’s ownership. Key needs to bolster its capital, which now stands at $184 million, having fallen from $584 million a year ago.
Key aims to double its revenue to $2.7 billion in five years under the new strategic plan, saying the rights issue will set the stage by providing the capital needed to grow its important motor portfolio.
Key made $5.6 million in net profit for the September third quarter, which reversed losses a year earlier. But over nine months in 2020, the company booked losses of $538 million, nearly doubling the $299 million of losses a year earlier. Those losses were mainly due to one-off reinsurance costs, management stated at the time.
Under the rights issue, new shares in Key have been provisionally allotted to the company’s existing shareholders in the proportion of “259 new shares for every 500 existing shares”, at the subscription price of $3.50 per share, stated the circular.
The share offer is renounceable, which means that existing shareholders who do not take up the offer would create space for other shareholders to increase their holdings.