The Paladin Energy Ltd (ASX: PDN) share price isn't going anywhere this morning as management requested a trading halt. This comes after the company announced an equity raise to repay its senior notes and reorganise its capital structure.
The uranium producer's shares are standing at 46.5 cents from yesterday's market close.
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What's with the Paladin share price?
The Paladin share price is not trading today as investors weigh up the company's latest update.
In its announcement, Paladin advised that it is undertaking an equity raise through a non-renounceable entitlement offer and institutional placement. The goal for the equity raise is to redeem the company's outstanding senior secured notes and reset its debt obligations. Paladin is hoping to raise roughly $218.7 million.
The institutional placement will see around 347.3 million new ordinary shares issued to investors to raise $128.5 million. Paladin was granted a waiver from ASX listing rule 7.1 to expand the placement capacity as the offer is underwritten. On traditional terms, the company would only be able to issue 15% of its shares without shareholder approval.
In addition, Paladin expects a 1-for-8.5 pro-rata accelerated non-renounceable entitlement offer of 243.7 million new shares to raise $90.2 million.
The company will issue both the placement and entitlement offer at 37 cents for each new share. This represents a discount of 20.4% on yesterday's closing price of 46.5 cents and a 17.2% mark-down on the 5-day volume average weighted price (VWAP).
Where will the funds go?
The proceeds of the equity raise will be primarily allocated towards redeeming the senior notes. Paladin forecasts the senior notes to have a balance of $203.6 million, including principal and interest, on 31 March 2021. The senior notes were originally due to mature in January 2023.
Management stated that the overhanging debt obligation hindered the company as it has security arrangements attached. This, in turn, affected its financial flexibility to resurrect uranium mining operations at the Langer Heinrich mine in Namibia.
Paladin has repaid the debt, it projects to have a net cash position of US$30 million. This will further boost its liquidity profile and allow the company to restart funding for the US$81 million required to bring the Langer Heinrich mine online.
What did management say about the capital raise?
Paladin CEO Ian Purdy commented:
This equity raise represents the final step in a truly transformational 'reset' of the Paladin story with the upcoming full redemption of the legacy corporate debt on Paladin's balance sheet.
The company now has the benefit of increased capital flexibility which provides a solid foundation for management to continue its focus on the restart of Langer Heinrich and value creation for equity holders in an improving uranium market.
The Paladin share price has gained more than 800% in the past 12 months and moved above 80% higher year-to-date.
