True Corp Plc has raised Bt3.38 billion from the sale of 402 million new shares to its parent, the Charoen Pokphand (CP) Group, and 42 institutional investors.

The company said in a filing with the Stock Exchange of Thailand (SET) that the newly issued shares would be offered at Bt8.40 each. The stock closed yesterday at Bt8.80, up 4.14 per cent.

Chief financial officer William Harris told Dow Jones Newswires the price of Bt8.40 a share was set via book building in which the CP Group did not participate, so the final price reflected the market's perception of the company's value.

The CP Group subscribed to 140 million shares, or 34.83 per cent of the offering. Its stake in True remains unchanged following the capital increase.

In addition to the 402 million new shares sold in the private placement, another 29.9 million will be offered to the World Bank's investment arm, International Finance Corp, one of the company's major creditors. The remaining 36 million new shares will be reserved for the exercise of warrants.

The company said that after the offering, True's paid-up capital would rise to Bt45 billion, from Bt40.98 billion currently.

Proceeds from the share allocation will be used for business expansion of True Move, True Corp's subsidiary.

As of March, True Move, the country's third-largest mobile-phone operator by subscriptions, had around 4.5 million subscribers, compared with 16.4 million for dominant player Advanced Info Service Plc and 8.7 million for

the second-largest operator, Total Access Communication Plc.

Analysts were generally positive about the recapitalisation, as it helps remove capital-call concerns, and the fresh funds should allow the company to expand its cellular business.

Capital Nomura Securities said the capital increase was in line with expectations.

The broker said the recapitalisation would prevent the company's shareholders equity plunging into negative territory this year.

The fund arising from the share offering will be used to finance True Move's network expansion in phase 5, which needs an investment of Bt3 billion to Bt4 billion through 2008.

Also, True Corp's debt-to-equity ratio after the recapitalisation will improve from 157 per cent as of the end of March to 40 per cent at the end of the year.

Kiatnakin Securities said the massive capital increase would create a "dilution effect" of around 11 per cent.

But the broker said the recapitalisation was seen as positive for the stock, because it improved the debt-to-equity ratio and alleviated concern that the company's shareholders equity would turn to negative.

The broker has set a fair value

for the shares at Bt12.20.

"All the funds participating in the offering are long-term investors, mostly well-known funds, and a vast majority of them already held shares in True," Harris said. The institutional investors include both foreign and domestic funds.

He said that after the capital increase, the company had no plans to tap either the equity market or the bond market for fresh funds in the near future.

"Most of the proceeds will be used for the cellular businesses, such as for network expansion," said Harris.

True Corp posted a loss of Bt4.27 billion last year, due in part to a Bt2-billion depreciation charge.

Siriporn Chanjindamanee

The Nation