# Underwritten SPP



## johannlo (18 May 2009)

Hello

WHat does it mean when a share purchase plan is fully underwritten? e.g. BSL.

I am going to take up BSL's offer but I'd like to understand what the implications of being underwritten are. Is it 'guaranteed' and if so how the heck do they 'guarantee' it i.e. does the underwriter agree to buy it back if you wish at the offered value up to X date or something?


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## prawn_86 (18 May 2009)

In this case underwritten means the underwriter, usually an investment bank or the like, states that it will 'fully' purchase any shares that cannot be placed to retail or other investors. This means the same amount of shares will be issued, no matter what the uptake from other investors.

It assures a certain amount for the company basically, while still giving everyone the chance to participate. Underwriters usually receive a fee for this, paid in cash or scrip, or both


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## Bushman (18 May 2009)

johannlo said:


> Hello
> 
> WHat does it mean when a share purchase plan is fully underwritten? e.g. BSL.
> 
> I am going to take up BSL's offer but I'd like to understand what the implications of being underwritten are. Is it 'guaranteed' and if so how the heck do they 'guarantee' it i.e. does the underwriter agree to buy it back if you wish at the offered value up to X date or something?




See section 9.4 of the rights issue prospectus for the underwriting agreement between Bluescope and Credit Suisse.

http://www.asx.com.au/asxpdf/20090505/pdf/31hfkdt9nqfvjn.pdf

By underwriting the issue, Credit Suisse agree to take up any short-fall in units in the rights issue. They do this for a fee. Easy money for Credit Suisse in this market as most rights issues are being offered at a substantial discount to NTA and thus are being fully taken-up by investors. 

Typically the lead underwriter will protect its capital position by a series of sub-underwriting agreements (like re-insurance). If underwriters do have to take up their allocation, then they can sell the shares on-market at a later date. 

Companies use under-writers to guarantee that they raise the capital they need. This also gives investors greater confidence in the issue.


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## johannlo (21 May 2009)

OK thanks for the clarification guys! 

So it basically assures the 'success' of the raising. It has no effect on your stock save to give some support to the SP via guaranteeing capital to the company. Cheers


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