Key rights issue offers big upside

Existing Stockholders of Key Insurance will be given the right to apply for new shares in the company and have been provisionally allotted 259 new ordinary shares for every 500 existing ordinary shares at $3.50 each.
The offer is renounceable and will therefore allow existing Key shareholders to assign their rights to these shares, wholly or in part, to others. Shares not taken up will be available to shareholders who indicate they wish to acquire more new ordinary shares than their allotment.
The issue will open on December 23 and will close on January 11, 2021, with the last date to renounce the rights, being January 4, 2021.
The issue will raise approximately $670 million to boost the company’s equity base. In the offering circular dated December 11, Chairman of Key Insurance, GK Group CEO Don Wehby explained, “The capital the rights issue will raise will be critical to the implementation of Key’s vision and strategic plan, which focuses on achieving profitability targets and sustainable long-term growth, which in turn will provide an attractive return on investment to our shareholders. The Board is extremely optimistic about Key’s future, and we are confident that the management team is well positioned to maximise the Company’s full potential and shareholder value.”
In March this year, GraceKennedy Financial Group acquired 65 percent of the share capital of Key.
The Issue is one component of the overall strategy implemented by Key’s Board and management team in 2020 geared towards strengthening the Company’s capital base so as to ensure regulatory compliance and future growth. Key has also entered into an agreement for the divestment of its investment property located at 18-22 Knutsford Boulevard. The sale of the property will be completed in the first quarter of 2021.
The company reported a small profit for the September quarter of $5 million from net premium income of $204 million but reported a loss of $538 million before tax credit of $180 million for the year to September. The year to date loss. includes a one-off charge of $323 million against profit.
The offer is underwritten by GK Capital Management. The stock’s last trade on Wednesday was $8.40, giving shareholders a big incentive to purchase.
This issue is the third to come to the market at the same time. Sygnus Credit Investments Additional Public Offer (APO) to open on December 18 and closes on December 23 to raise upwards of US$10 million while Derrimon Trading APO opens and closes in January to raise $3.50 billion.