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Why the Superloop share price crashed 11% lower today

The Superloop Ltd (ASX: SLC) share price has returned from its trading halt and crashed lower on Thursday.

In morning trade the shares of the independent provider of connectivity services are down 11% to 90 cents after announcing the completion of its institutional placement and institutional entitlement offer.

What did Superloop announce?

This morning Superloop announced that it has received commitments for $72 million after successfully completing its institutional placement and institutional entitlement offer.

Management advised that the bookbuild was strongly supported by new and existing institutional and sophisticated investors from Australia and overseas. These funds were raised at 82 cents per share, which was an 18.8% discount to the last close price.

The institutional placement will raise approximately $57.6 million via a fully underwritten two-tranche placement.

A total of approximately 48 million new Superloop shares will be issued to successful applicants under the first tranche of the institutional placement and the institutional entitlement offer. These funds, which total approximately $39.4 million, will be available to Superloop at the start of next month.

After which, the second tranche of the institutional placement remains subject to shareholder approval being obtained at its 2019 annual general meeting at the end of next month.

Retail Entitlement Offer.

The company will now push ahead with its retail entitlement offer which aims to raise a further $20.2 million.

According to the release, eligible retail shareholders will be able to subscribe for 1 new share for every 6 existing Superloop shares held at 7.00pm AEST on September 26 2019 at the offer price.

The retail entitlement offer opens on September 30 and then closes at 5.00pm AEST on October 14.

Why is Superloop raising the funds?

The proceeds of the capital raising will be applied principally to pay down its senior secured debt. This is expected to reduce its net debt plus net payables from $93.5 million to $7.5 million and provide it with  a ~$60 million funding runway for future success-based growth capital.

Superloop’s Chairman, Michael Malone said: “Superloop has invested over $256 million in fibre network assets, and continues to make progress in monetising the value of those assets. The support from Superloop’s senior lenders has been invaluable, but it is necessary and appropriate to restructure those facilities to provide a platform for Superloop to continue to access funding on favourable terms to support its monetisation strategy.”

Whilst Superloop looks like a better investment option now, I would still buy Telstra Corporation Ltd (ASX:TLS) or these blue chips ahead of it for the time being.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of SUPERLOOP FPO. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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