Fletcher Building moves to PATCH UP FINANCES

Fletcher Building is to beef up its finance with a $750 million share sale and a sale of some businesses.

The embattled company, which has lost close to NZ$1billion (FJ$1.4bn) over the past two years on big construction projects, is to sell new shares at NZ$4.80 (FJ$7.15) each, which is a 23 per cent discount to the company’s last traded price of NZ$6.27 (FJ$ 9.34 ) on Monday.

Existing shareholders will be offered one new share for every 4.46 shares they currently own, and any shares not taken up will be acquired by investment companies underwriting the issue. The company’s shares were placed on a trading halt as it worked out the details of the capital raising.

The company has been reviewing its business and finances since it disclosed massive losses on a variety of projects, notably the Christchurch Justice Precinct and the International Convention Centre in Auckland. The losses caused it to breach the terms of its borrowing agreements with banks and private investors.

“An outcome of the work that we have completed to date on the group strategy is that it is now appropriate to strengthen our balance sheet,” chief executive Ross Taylor said.

He said the company would now concentrate on New Zealand and Australia businesses. “Reducing our net debt also provides us with the opportunity to undertake divestment processes for Formica and the Roof Tile Group on terms that should maximize shareholder returns.” Speculation about Fletcher Building’s future has increased in the past week with news that an Australian investment company, Ellerston Capital, has built up a 5.1 per cent stake in the company, and suggestions that Australian conglomerate Wesfarmers has also been buying shares.

Fletcher Building said it had negotiated a new NZ$500m (FJ$ 745m) standby facility with three banks, but was still talking to United States-based private investors. The company has about NZ$2.2bn (FJ$ 3.27bn) in debts, and total borrowing facilities of NZ$3.1bn (FJ$ 4.62bn).

It reaffirmed it is trading in line with expectations for a full year underlying profit of between NZ$680m (FJ$1,013m) to NZ$720m (FJ$ 1,073m), excluding a loss of NZ$660m (FJ$983m) from the construction business.