Cement-maker TPI Polene Plc (TPIPL) plans to sell 1.67 billion new shares to existing shareholders and through a private placement to raise Bt16.78 billion to pare down its debts.

The company plans to sell 807.5 million shares to existing shareholders at a ratio of one new share to each share held, at a price of Bt10 each, the company said in a filing with the Stock Exchange of Thailand (SET).

The subscription period is scheduled for between August 7 and 11.

An additional 857.77 million shares will be offered via private placement to a group of investors, mostly members of the Leophairatana family, for Bt10.15 each, the statement said.

Subscription for the private placement is scheduled for August 21.

The private placement shares are subject to a two-year silent period, during which subscribers are not permitted to sell their newly acquired shares.

TPIPL yesterday closed at Bt11, a 13.4-per-cent plunge from the close of trading on Friday.

But it's not clear just how much the company can raise through the offering.

Dow Jones Newswires quoted an analyst as saying that a group of financial institutions that own a substantial stake in TPIPL after their loans to Thai Petrochemical Industry, TPIPL's former parent, were converted into equity, might not care to participate in the rights issue.

Late last year, the creditors agreed to accept 249 million shares Thai Petrochemical held in TPIPL in lieu of US$250 million (Bt9.5 billion) in debt and a marginal amount of accrued interest.

If TPIPL raises the entire Bt16.78 billion and pays down its loans, its debts will be reduced to Bt7.11 billion. It said that its debt-to-equity ratio at the end of 2006 and 2007 would be 0.1-to-1 and 0.05-to-1 respectively.

 "As the company has an outstanding principal amount of debt of Bt23.11 billion, as of June 30, 2006, it has an obligation to pay the outstanding principal debt within the time specified in the business reorganisation plan which will end on December 31, 2006," the company said in a statement.

"Net income derived from business operations may not be sufficient to repay all outstanding principal debt. Together with the fact that the company may not be able to procure a new source of loans to repay the whole amount of the outstanding debt within such a period, the company has found it necessary to sell equities."

TPI Polene's major creditors are KFW, Bangkok Bank, Standard Chartered Bank and JP Morgan Chase and Co.

Seamico Securities said in a note that the massive share allocation was expected to improve the company's financial position and profitability due to a lower interest burden.

However, the broker still maintains its "sell" recommendation on the stock in anticipation that the company will be under pressure as a result of higher costs fuelled by record-high oil prices.

Also, the company's shareholders would see their holdings diluted 35 per cent after the stock sale.

After the share allocation, the Leophairatana family's stake in TPIPL will increase to 49 per cent from 22 per cent while Thai Petrochemical Industry's stake will be diluted to 20 per cent, the broker said.