It may just be wishful thinking, but now that Fortescue Metals...

It may just be wishful thinking, but now that Fortescue Metals Group entered a trading halt until as late as Tuesday morning, there is now unconfirmed speculation it is attempting to sell a 15 per cent stake in the company to its biggest customer, China’s Baosteel, over the weekend.

The theory is the placement could be done at $4 a share – a 33 premium to the last closing price of $2.99 a share. There was no immediate reply from Fortescue seeking comment.

A 15 per cent placement could be done without shareholder approval, although it would need the tick from the Foreign Investment Review Board and Chinese regulators.

To date, founder and chairman Andrew Forrest has been wary of raising equity. But doing a placement at a premium would mean less dilution than would be needed in a sale to institutions.

On Street Talk’s calculations, selling 15 per cent to Baosteel would raise $2.15 billion and lower Forrest’s personal stake to 27 per cent from 32 per cent – meaning he would still have significant control of the company. One issue could be that if Baosteel did buy 15 per cent, it combined with existing Chinese holder Hunan Valin would hold a stake on par with Forrest.

Fortescue’s senior management team was in Hong Kong on Thursday, so it wouldn’t be surprising if they visited Chinese friends over the weekend. Getting the sign-off on a placement deal with Baosteel should also help make its lenders more comfortable with the prospect of relaxing covenants.