Raffles Education raises $70 million

Singapore-listed Raffles Education Corporation yesterday completed a top-up placement to raise S$102.4 million ($70 million). The company took advantage of a rally in its share price to raise capital to pay off debt and keep up with payments for a university purchased in China.

The deal consisted of 160 million shares, offered at a price between S$0.62 and S$0.65 apiece, which represented a discount of between 5.1% and 9.5% versus yesterday's closing price. The deal priced near the top, at S$0.64, for a discount of 5.7%.

According to one source, the order book comprised mainly of long-only funds, but with a strong showing of hedge funds. The majority of investors were Asian, but the deal was open long enough to attract a few US accounts to participate. The order book was over two times covered.

Raffles Education is a company that provides education services across the Asia-Pacific. It is the largest private education company in Asia and focuses on teaching design and management. Courses available include fashion design, visual communication, multimedia design, interior design and business administration. It opened its first college in Singapore in 1990 and now has three universities and 26 colleges spread over 10 countries.

The company is raising capital for two reasons. Approximately 38% of the cash will be used to pay off or retire bank loans, while 62% will be used to repay part of an outstanding consideration for the acquisition of Oriental University City Development (OUC) in Langfang City, Hebei Province. Anything left over will be used as working capital.

OUC is a 3.3 million square metre, self-contained campus. Within the school, the company provides services to 14 colleges populated by 35,000 students.

The total acquisition cost for OUC is Rmb2 billion ($292 million), to be paid in four instalments over four years. The company made the first payment at the end of 2008. But in May it entered into an agreement to reschedule the repayment of the remaining Rmb1.5 billion. Under the revised schedule, another Rmb500 million will be paid in April 2010; Rmb105 million will be paid no later than the end of December 2010; Rmb500 million will be paid by December 2012 with the remainder to be paid by December 2013.

Raffles Education's share price was up by 5.4% yesterday. Despite a 6.5% drop on Monday, the stock traded well last week, with a 9% rise last Tuesday and Wednesday and a 6% rise on Friday.

Credit Suisse acted as the sole bookrunner for the deal.

Raffles Education was not the only company looking to raise capital last night - Shui On Land, a Hong Kong-listed Chinese property developer, was tapping the market for as much as HK$2.06 billion ($264 million) through an accelerated bookbuild. A total of 418 million shares were offered at a price of between HK$4.82 and HK$4.93, representing a discount of between 6% and 8% to yesterday's closing price.

It intends to use the capital to develop its current land bank and for general corporate purposes, according to a term sheet.

BNP Paribas, Cazenove Asia and Goldman Sachs were the joint bookrunners.