Babylon Pump & Power has secured $0.4 million in convertible loans from key shareholders and plans a $12.7 million rights issue at a 35% discount to address working capital shortfalls and reduce debt.
- Convertible loans raised from chairman and major shareholder
- Rights issue set at two shares per one held at $0.05 each
- Rights issue aims to satisfy NAB loan conditions and reduce debt
- Blue Hire Vendors to sub-underwrite part of the rights issue
- ASX grants waivers for rights issue structure and timing
Convertible Loans Bridge Short-Term Working Capital
Specialist mining services provider Babylon Pump & Power (ASX:BPP) has raised $0.4 million through unsecured convertible loans from Non-Executive Chairman Jamie Cullen and 8.7% shareholder Byron Ynema. These funds are intended to support short-term working capital needs as the company progresses its broader capital raise. The loans carry 11% annual interest and can convert into shares at a floor price of $0.05, aligning conversion terms with the upcoming rights issue. An additional $0.6 million may be raised from other major shareholders and investors under similar terms.
Rights Issue to Raise Up to $12.7 Million at Discounted Price
Babylon plans a pro rata non-renounceable rights issue to raise approximately $12.7 million before costs, issuing up to 254 million shares at $0.05 each. This price represents a roughly 35% discount to the last closing price of $0.077 before the company’s shares were suspended from trading in April 2026. The rights issue is designed to address a working capital shortfall, comply with revised loan facility conditions imposed by National Australia Bank (NAB), and materially reduce the company’s debt levels.
The company has appointed Leeuwin Wealth and Cumulus Wealth as joint lead managers and corporate advisors, with Leeuwin Wealth in advanced talks to partially underwrite at least $7.27 million of the raise. The 2-for-1 share offer ratio was selected to provide sufficient capital to meet NAB’s conditions and fund growth initiatives in the water equipment hire business, which has been a key focus following Babylon’s recent strategic reset.
Blue Hire Vendors to Sub-Underwrite Deferred Consideration
Babylon’s acquisition of Blue Hire comes with deferred consideration of up to $8.2 million, contingent on normalized 12-month revenue to June 2026. Under NAB’s loan conditions, at least $5 million of this deferred sum must be paid in shares during August 2026. The Blue Hire Vendors, including Byron Ynema and Royal Haze Pty Ltd, have indicated willingness to sub-underwrite up to $5 million of the rights issue via debt-for-equity conversion, reducing the deferred cash component accordingly. Any remaining deferred cash will be payable in July 2027.
ASX Waivers Allow Rights Issue Structure and Timing
The ASX has granted Babylon waivers to permit the rights issue to proceed on a non-renounceable basis at a 2-for-1 ratio, exceeding the usual 1-for-1 limit, and to set the record date before shareholder approval is obtained. These waivers are conditional on shareholder approval and the company’s shares remaining suspended until completion of the capital raise or the resumption of trading by 31 August 2026. Substantial shareholders and underwriters will be excluded from voting on the resolution to avoid conflicts of interest.
Babylon’s shares have been suspended since April amid strategic uncertainty and capital raising efforts. The company is targeting completion of the rights issue and reinstatement of trading by the end of August, aligning with the timetable required to satisfy NAB’s loan facility conditions and support its ongoing operations.
Bottom Line?
Babylon’s capital raise is a critical step to stabilise its finances and meet lender conditions, but success hinges on shareholder approval and underwriting agreements.
Questions in the middle?
- Will shareholder support for the rights issue materialise given the significant dilution at a discounted price?
- How will the partial underwriting by Blue Hire Vendors impact Babylon’s balance sheet and future cash flows?
- What are the prospects for Babylon’s trading suspension to lift promptly following the capital raise completion?