resourcehouse ipo canned, page-3

As mentioned - there's aways a plan B...........the IPO process may have flushed a few more interested parties out.

Palmer chases China as his Resourcehouse IPO fails
Paul Garvey, in Hong Kong From: The Australian June 06, 2011 12:00AM

Clive Palmer has withdrawn the Resourcehouse IPO Source: The Australian

A DEFIANT Clive Palmer has vowed to use Chinese debt funding to deliver his massive Queensland coal project after the failure of his proposed $7.3 billion Hong Kong listing, Resourcehouse.

The company formally withdrew its plans for an initial public offering at the weekend, blaming weak market conditions for a soft response to the offer.

Resourcehouse had originally aimed to raise up to $3.4bn in a listing that would have funded the development of coal and iron projects and delivered Mr Palmer a shareholding worth over $3bn.

While both commodity prices and equity markets have softened since the launch of the Resourcehouse IPO, the company has also endured criticism over its unconventional corporate structure.

Speaking to The Australian in Hong Kong yesterday after the IPO's withdrawal, Mr Palmer said the company had already received commitments from Chinese banks for an additional $1.5bn in debt funding.

He said the cash would help push Resourcehouse's China First coal project in Queensland's Galilee Basin towards production. He predicted the development would generate more than $3bn in profit each year at current coal prices.

"If it means I have to end up with a higher equity stake in a business with $3.2bn in annual cashflow, then so be it," he said. "That's not a bad problem to have."

Resourcehouse had originally planned to direct $US2.4bn of the proceeds from the IPO into advancing the coal project.

The $1.5bn in debt commitments, coupled with $400 million pledged by Resourcehouse's Chinese partners, Metallurgical Corporation of China and China Railway Corporation, and earnings from his other business interests, would help advance the coal project.

"It's not the end of the world. The project is still going ahead," Mr Palmer said.

CITIC Pacific's Sino iron-ore project in Western Australia would generate about $500m a year in royalties for him, when it came into production in the coming months, while his Yabulu nickel refinery was generating around $250m a year in profits. Those funds would be pumped into advancing the Galilee Basin coal project.

The Resourcehouse prospectus forecasts the full development cost of the coal project at $US8bn, and Mr Palmer said Chinese banks would be used to fund the bulk of the remaining capital expenditure. "If you tried to raise $7bn in debt from Wall Street, or down in Sydney, they would laugh at you," Mr Palmer said.

"It's not the same when you're talking to Chinese banks and you've got coal assets to sell to China."

While some of his employees were disappointed that the listing plans had been shelved, the process had been a "good experience" and only cost six to seven weeks of the project's schedule.

"It's a boon for me. It means I don't have to go up to Hong Kong all the time," he said.

"I can spend more time sitting on my boat on the Great Barrier Reef instead."

Mr Palmer said the company had almost filled the IPO in its first week, before support evaporated as equity markets soured.

Resourcehouse noted that the Dow, Standard & Poor's 500 and Nasdaq composite indexes had all declined in the past five weeks in the longest losing streak since mid-2008.

The IPO of Swiss-based commodities trader Glencore has also had a soft reception in Hong Kong, with its shares struggling to get above their issue price since its listing late last month. Glencore's Hong Kong-listed shares closed on Friday at a new low of $HK64.55.

A Hong Kong-based fund manager said the IPO's failure had not been a surprise.

"It's always going to be a tough ask to be selling those kinds of assets in this kind of market," he said.

"Glencore just got theirs away, but the market has been very soft."

Resourcehouse is not expecting to post a profit until 2014.