Goodman Fielder’s A$259 million PAITREO raising is a sign that the renounceable rights issue structure will become more widely accepted, according to partners who have worked on both PAITREO transactions that have occurred so far. The Goodman Fielder raising follows a renounceable rights issue conducted by Origin Energy in March. “The reason this is the first PAITREO since Origin is a function really of the paucity of significant deals during that period coupled with a bearish market where offers that were put out preferred the non-renounceable structure to any sort of renounceable structure,” said Clayton Utz partner Stuart Byrne, national head of the firm's equity capital markets team.

If this second PAITREO offer succeeds, however, that could start to change. “With debt markets skittish we will start to see more equity raisings,” said Mallesons Stephen Jaques partner David Friedlander, who advised the joint underwriters on the Goodman Fielder transaction. “One of the good things about what’s available for clients is that there are straight up and down deals and now three types of accelerated transactions. We have certainly had more interest in renounceable transactions in recent weeks.”

According to Friedlander any company with a ‘decent sized’ retail register could be a suitable candidate for a PAITREO style offer (Goodman Fielder is believed to have a register which is around 30 percent retail). Byrne, who was instrumental in the Origin PAITREO structure, agrees: “All you really need for a PAITREO is an issuer and bankers willing to consider a renounceable structure, instead of just a non-renounceable deal, and a reasonably sized retail register and offer size.”

There are more challenges involved in advising a client with a stapled security or trust, such as a REIT, but this should not take the structure off the table as an option. “Retail unitholders need to be given the ability to accept the offer early, on the same timetable as institutional investors, and receive issued shares on the issue date,” said Byrne. “The PAITREO structure is flexible enough to do that. There’s no sense that given the right circumstances it couldn’t be used for a REIT or stapled structure.”

Despite the possibility of more successful PAITREO transactions, and the fact they are said to enable greater participation and benefits through the added ability to trade rights on a market, For clients considering alternatives, having reached the stage where they are deciding between a renounceable or non-renounceable offer, a non-renounceable alternative might still suit the client best where markets are volatile or generally depressed. Byrne noted that non-renounceable structures can encourage participation in the offer, resulting in lower execution risk to issuer and its bankers.

Goodman Fielder was advised by Freehills partners Rebecca Maslen-Stannage and Tim McEwen in the latest capital raising transaction.