DataRoom AM: QBE cash hunt

QBE may look to raise almost $1bn to ease its debt load after a rough year, while Rio Tinto considers selling out of its Bougainville Copper project.

It’s been a harrowing year for QBE Insurance shareholders and the firm’s share price could face more downward pressure this week as speculation surfaces of an imminent capital raising just short of $1 billion. On the plus side, stockholders will at least get access to discounted stock.

Elsewhere, Rio Tinto puts another asset on the auction block, Apache Energy trumpets great news ahead of a global asset sell-off and Aurizon weighs a possible $2bn divestment.

QBE Insurance will today announce plans to tap institutional investors for $600 million, according to The Australian Financial Review. The move represents the first capital raising from QBE since John Neal took the reins of the company in August 2012 and will allow the firm to lessen its debt load after a challenging year that has seen it recently downgrade profit forecasts.

The insurer will look to raise a further $200m from retail shareholders, with investors tipped to get access to new stock at a 5 per cent discount to the firm’s latest price. While shareholders may appreciate the cheap entry point, it represents another blow given the firm’s stock has slumped 37 per cent over the past 12 months.

Meanwhile, BHP Billiton is not the only major miner mulling further simplification of its portfolio, with rival Rio Tinto considering a sale of its majority stake in Bougainville Copper. Rio currently holds a 53 per cent stake in the firm, which based on the current valuation of the free floated shares of Bougainville Copper, is worth just shy of $100m. However, a fair valuation is hard to ascertain given continued political interference in the mothballed Panguna mine (the main asset of the firm), which could cost $5bn billion to restart but potentially offer $60bn in future revenues.

Elsewhere, US-based Apache Energy set tongues wagging yesterday with news of a major oil find off the coast of WA -- and it could have implications for a possible sell-off of its Australian assets as the firm refocuses on the US market. With the market value of JV partner Carnarvon Petroleum surging over $150m on the news, there is every chance Apache could pursue a listed spinoff of its local assets, which currently also include a 13 per cent stake in the Wheatstone LNG project.

In infrastructure, the $5 billion sale of a lease tied to the nation’s busiest port could be altered to draw in higher bids. As it stands, the Port of Melbourne will be sold next year with a 40-year lease attached, but advisers Morgan Stanley and Flagstaff Partners may push for the length of the lease to be extended to 99 years in order to support higher offers. However, a decision will likely not be forthcoming until after the state election in November.

Further north, Aurizon is considering a divestment of part of its lucrative Queensland tracks business, according to the AFR. The ASX-listed firm has yet to engage in discussions with prospective buyers, but it is believed a sale of a 49 per cent stake could draw bids in the order of $2bn.

Also in infrastructure, high-speed rail has again been forced back onto the agenda as the federal government discusses its viability with several of the world’s largest rail groups. While it currently remains a longshot given the current $110bn pricetag, reports have emerged that the Japan Bank for International Co-operation is prepared to fund the massive project as long as the government commits to minimum passenger numbers.

In the IPO market, investment company QV Equities has raised over $180 million ahead of its debut on the ASX on Friday. The amount raised came in at the upper end of the expectations put forward by manager Investors Mutual.

Finally, KKR and Abacus Property Group have teamed on the $120m purchase of a 70 per cent stake in three towers of Melbourne’s World Trade Centre complex, while hedge fund Chenavari Investment Managers has drawn up sale plans for Sphere Healthcare, with an auction likely to draw bids just shy of $50m, according to the AFR.

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