Superloop raising AU$35.3m to fund Asia network expansion

Asia-Pacific fibre infrastructure company Superloop has announced that it is hoping to raise AU$35.3 million through a fully underwritten one-for-seven pro-rata accelerated entitlement offer of shares.

Superloop is offering a total of 16,793,942 new shares at AU$2.10 per share, a 12.9 percent discount off the closing share price on June 16 prior to Superloop placing itself in a trading halt on Friday morning pending the announcement.

"The funds raised from this entitlement offer will be used to fund investment in the Hong Kong TKO Express domestic submarine cable project; expansion of the HK fibre network beyond the initial network; expansion of the Singapore network (including but not limited to Project Red Lion); general working capital; and the costs of the entitlement offer," Superloop said in an announcement to the Australian Securities Exchange (ASX) on Friday.

Eligible shareholders can subscribe for one new share per seven existing shares, with the offer including an institutional component and a retail component. The institutional offer will be open for the exercise of entitlement between June 17 and June 20, and will see shares issued on June 29, while Australian and New Zealand entitlements under the retail offer can be exercised between June 24 and July 12, and are expected to be issued on July 19.

The entitlement is non-renounceable, non-tradeable, and non-transferable.

The founder and interim CEO of Superloop, Australian entrepreneur Bevan Slattery, will not take part in the offer, which will see his 51 percent holding decrease to around 44.7 percent. The company noted that this "dilution is unlikely to have any affect on the control of Superloop", however.

Superloop also provided an update of its networks throughout the Asia-Pacific region.

Its Singaporean network now consists of 132km of Superloop fibre under Project Red Lion; eight datacentres; two cable landing stations; and 14 strategic commercial enterprise buildings now connected of its target of 25 buildings. Singapore is a key gateway between Asia and Europe, according to Superloop, with seven new datacentres planned and 15 existing subsea cables.

Superloop's 110km Hong Kong fibre-optic telecommunications network is due to be completed in December 2016, with two 1,000-core cables reaching 30 sites and datacentres initially. Superloop added that it is targeting Hong Kong connectivity because it is an "international springboard to mainland China and also [a] gateway for mainland China to the rest of the world". Hong Kong has 10 new datacentres in the works, along with 13 existing international telco submarine cable systems, a mobile penetration rate of 233.3 percent, and an average peak internet connection speed of 92.6Mbps.

In Australia, the company has 288 cores of fibre connecting 40 datacentres across Sydney, Melbourne, and Brisbane.

At the end of last year, Superloop similarly raised AU$7.4 million through its share purchase plan (SPP) offer for the express purpose of building out its network in Hong Kong.

During last year's SPP, Superloop issued 3.9 million shares at AU$1.90 per share; prior to this, the company had raised AU$41.9 million through placement of 22,045,000 fully paid ordinary shares at AU$1.90 per share to professional and sophisticated investors.

Of the proceeds raised, AU$45 million was used for building the Hong Kong network asset; AU$1 to AU$2 million for Hong Kong sales and operations working capital; AU$1.5 to AU$3.5 million for expanding the company's Singaporean network; and AU$1.4 million for payment of costs for the offer.

Superloop announced in early December that it had entered an agreement to construct and run the fibre-optic network in Hong Kong, to which it holds a 25-year indefeasible right of use, with two five-year options to extend.

The Superloop (Hong Kong) subsidiary was granted a Unified Carrier Licence by the Hong Kong Office of the Communications Authority last August.

At the time, Superloop also announced plans to build TKO Express, a direct submarine cable-crossing path between the datacentre campuses of Tseung Kwan O (TKO) -- Hong Kong's new major hub for technology, datacentre, financial, and media companies, as well as submarine cable landing stations -- and Chai Wan.

Superloop also announced in early December further investment into Project Red Lion, dedicating between AU$1.5 million and AU$3.5 million from its funds raised through the SPP.

In February, Superloop recorded a net loss of AU$3.98 million for the first half of the 2016 financial year on revenue of AU$1.94 million and earnings before interest, tax, depreciation, and amortisation (EBITDA) of negative AU$3.51 million.

Operating expenses amounted to AU$3.9 million, with AU$2 million of this arising from employee expenses and AU$1.1 million from professional services. Contributing to this was the company's acquisition of broadcast media network Cinenet Systems for AU$3 million during the reporting period.

Cinenet, established in 2003, owns a high-speed broadband network specifically for use by the broadcast and media industry, which will provide Superloop with an avenue to enter the media industry and the US market.

Partially due to this acquisition, Superloop's net assets totalled AU$100.9 million as of the end of December 2015, almost double the AU$53.8 million reported at the end of June 2015, while the company reported cash and cash equivalents of AU$35.1 million.

The fibre company expects to achieve revenue of AU$10 million by July.

Superloop was founded by Slattery in 2014, and listed on the Australian Securities Exchange in June 2015 after a successful initial public offering that raised AU$17.5 million through more than 2,300 investors.

The company was created when Megaport's fibre assets were spun off so that Megaport could return its focus to expanding its layer 2 elastic connectivity platform outside of Asia and Australia.