Fletcher Building shares rose initially after resuming trading yesterday, having raised $515 million towards a $750 million recapitalisation plan.
Following Tuesday’s announcement of the recapitalisation, and a trading halt on shares, Fletcher said yesterday institutional investors had put in $515 million.
On reopening, the shares rose 3.3% to $6.20. If shareholders do not take up their entitlement over the next three weeks, they face dilution of their share holdings.
The refinancing comes after revelations 16 construction contracts under Fletcher’s Buildings + Interiors division, most at fixed prices, would return $952 million in accumulated and estimated losses over two years. Auckland’s international conference centre and Christchurch’s justice precinct accounted for most of the losses.
Next week, existing Fletcher shareholders can take up the offer of purchasing one new share for $4.80 for every 4.46 shares held, until the offer closes on May 11.
Both the institutional and retail offers were fully underwritten. Craigs Investment Partners broker Chris Timms said Fletcher was taking the right steps in refinancing this way, noting the 98% uptake by institutional investors reflected strong demand.
However, in coming weeks, the smaller retail shareholders would have to decide to either not take up the offer, and see share parcels diluted, or come up with the cash, also knowing there would be no income from dividends for a year. Aside from the $750 million offer to shareholders, Fletcher had also negotiated a new $500 million standby banking facility, with ANZ, Westpac and MUFG Bank.
The standby facility can only be used to help fund repayment of US Private Placement notes worth $1.11 billion.
Fletcher remains in talks with USPP over renegotiation of the loan and terms, but USPP could call in the debt after April 30.
Fletcher also revealed this week it plans to sell its offshore divisions Formica and Roof Tile, which Morningstar brokersestimated were worth about $700 million.
