UPDATE 1-Olam bonds-with-warrants deal raises $712.5 mln

Mon Dec 3, 2012 8:40am EST

* $750 mln of 6.75 pct five-year bonds being sold at 95 pct

* Bonds have warrants to buy total 387 mln shares at $1.291

* Deal being offered pro rata to shareholders

* Temasek fully backs offer, states support for Olam

* Temasek to take rights not subscribed by shareholders (Adds detail, background)

By Anshuman Daga and Eveline Danubrata

SINGAPORE, Dec 3 (Reuters) - Singaporean commodities trader Olam International, under attack from short-seller Muddy Waters, has raised $712.5 million through an issue of bonds with warrants to buy shares, days after saying it had enough cash.

The deal, to be offered pro rata to Olam shareholders, is backed by Singapore state investor Temasek Holdings which has a 16 percent stake and said on Monday it would buy rights not taken up by other investors.

For nearly two weeks, Olam has been locked in a battle with Muddy Waters, which in a 133-page report said aggressive spending, accounting practices and debt levels had left the company on the verge of collapse.

Olam has sued Muddy Waters in a Singapore court and issued a detailed rebuttal of the allegations, saying it was not at risk of insolvency and had enough liquidity.

Its bonds-with-warrants issue, intended to bolster Olam's liquidity and its credibility in the markets, was seen by analysts as a strategy that it could use to put the squeeze on short-sellers such as Muddy Waters.

Some shareholders may be unhappy with the potential dilution to their holdings, after Olam chief executive Sunny Verghese had said it would not be issuing new bonds or equity. Temasek will not be one of those complaining.

"While no business is without risks, we remain comfortable with Olam's credit position and longer term prospects, and are pleased to have another opportunity to invest in the company, alongside other shareholders," David Heng, Temasek Senior Managing Director, Investments, said in a statement.

Olam's shares have fallen 10 percent since the battle with Muddy Waters began last month. They closed at S$1.575 on Friday and were suspended from trade on Monday.

Its bonds have also fallen, with an issue due 2017 , the most liquid, slipping to 83.5/84.5 cents on the dollar for a yield of 10 percent, down from around 96/97 before the Muddy Waters allegations surfaced.

Olam borrowed heavily to fund its expansion beyond trading into the actual production and processing of agricultural commodities from cotton to coffee to cashew nuts. Bond markets have grown jittery over debt which totalled S$8.4 billion ($6.9 billion) at the end of September.

A rights issue, analysts said, would both bolster its liquidity and put pressure on short-sellers, since shareholders who had lent them stock would now be calling those shares back in so they could participate in the issue.

Olam is issuing a nominal $750 million of 6.75 percent five-year bonds at a price of 95 percent, raising $712.5 million.

The bonds have warrants attached that will allow holders to buy a total 387 million shares at $1.291, which would raise $500 million if they were all exercised.

The bonds and warrants will be traded separately.

Credit Suisse, DBS Bank, HSBC, and J.P. Morgan were joint bookrunners, lead managers and underwriters for the transaction. ($1 = 1.2205 Singapore dollars) (Additional reporting by Umesh Desai in Hong Kong; Editing by Edmund Klamann and Dan Lalor)

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