On Monday the BoD of the Russian developer OAO RTM decided to call an extraordinary meeting of shareholders on March 3, 2008. The company's press-release states that the meeting is to make a decision on the additional issue of over 87,804,880 shares at par value of RUB 0.001.
If the shareholders approve this decision, the additional placement is likely to be carried out in two stages. Firstly, the shares are to be placed among the existing shareholders, as of January 21, 2008. Afterwards, the shares are to be placed through an open subscription.
The placement price recommended by the BoD for the additional common stock is not to be more than USD 2.05 per share. This is 30% below the current market valuations. Therefore, a considerable discount to the market price indicates that the company intends to ensure a higher success probability for its additional placement amid slightly negative conditions in the development market, due to the abundance of placements in 2007.
We are moderately upbeat about the news that RTM plans an additional issue. The Russian developer might raise approximately USD 180 mn in this placement. We believe that this is an optimum way to finance the company’s projects with a high leverage level. The company plans to finance its projects in retail and commercial real estate and invest in the diversification and expansion in the sectors of trading centers, hotels and housing.
Currently, we do not have any recommendation for shares of OAO RTM.
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