11 February 2011 – restructuring

The group has finally announced details of its financial restructuring, with a rights issue and placing to raise gross proceeds of £80.5m with new banking facilities also being lined up.  The rights issue will involve the issue of over 1.2 billion new shares at 6.54p (on the basis of 5 new shares for every 2 held) and the funds have been committed by either irrevocable undertakings or underwriting.  The placing is being undertaken to allow some of the directors to acquire shares in the company.  Some convertible shares have also been issued to some of the group’s lenders in exchange for a debt write-off of £40m.  The net effect of the restructuring will be to reduce borrowings by some £110.5m. 

Since 1 October, overall sales at  the group on a continuing basis were slightly behind the previous year with adverse weather conditions impacting trading.  The capital restructuring will provide the group with sufficient funds to implement the operational changes identified in the strategic review and the group sounds optimistic about the future.   

Clearly the rights issue is a heavy one, with investors being asked to stump up more than the value of their existing holdings.  This may well deter many investors from taking up their entitlement.  However, the long-term future of the group should be assured after the completion of the restructuring and although it will be a long road back, readers should probably TAKE UP THE RIGHTS.