Fletcher seeks $750m from investors
Fletcher Building is asking shareholders to inject $750 million into the company.
The move is designed to strengthen its balance sheet following disastrous losses on 16 high-profile construction projects including Skycity’s International Convention Centre.
After announcing the capital raising to the New Zealand stock exchange, Fletcher’s chief executive, Ross Taylor, expressed relief that Australian company Wesfarmers was not engaged in a takeover bid for Fletcher while the capital raising was under way.
‘‘It’s one less moving piece,’’ he said, after confirming Wesfarmers had not been building a stake in the company.
‘‘It’s obviously easier not to have a takeover going on in the background. 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.
‘‘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 maximise shareholder returns.’’
The company has been negotiating with its creditors after breaching the covenants on its bond issues.
Taylor said Fletcher was undertaking action to strengthen its balance sheet to ‘‘enable a permanent solution’’ to its current bank and United States loan defaults.
It would raise $750m through a fully underwritten pro rata entitlement offer, and establish a new ‘‘standby’’ banking facility of $500m, which may be needed if an agreement could not be struck with the company’s US debt backers and they demanded their money back.
The company believed that a strengthened balance sheet would ‘‘better enable it to execute its immediate and longer-term strategic objectives’’.
Taylor also signalled that asset sales were going to happen.
The company would focus its activities on New Zealand and Australia and would sell its Formica and Roof Tile Group businesses.
But Taylor had no plans for the money raised from those sales, which he anticipated would happen over the next 12 to 18 months.
Fletcher would provide a detailed update and full overview of the group’s strategy in June once a full review was completed.
Fletcher had reviewed all its troubled building projects, five of which, including Christchurch’s Justice Precinct, are complete.
No further losses on the projects had been identified, and the company remained on course to post an estimated full-year loss of $660m.
However, it had found a problem project in its infrastructure construction business, the Puhoi to Warkworth project to extend State Highway 1.
‘‘At this point, Fletcher Building is reporting a nil margin for the [Puhoi to Warkworth] project,’’ the company said.
The $500m banking facility is provided by ANZ, Westpac and Japan’s largest bank, MUFG.
The share offer would see eligible shareholders offered the opportunity to buy one share for every 4.46 shares they owned.
Those who did not decide to buy shares would see their current holdings diluted in value as the new shares would be issued at a 23.4 per cent discount to the closing share price on the NZX on April 16.
Any entitlements to buy shares that were not taken up by existing shareholders would be offered to institutional investors, and for a retail book-build by share brokers.
Proceeds from the offer would be used to repay $714m of debt, as well as the $25m cost of the capital raising.
That would drop the company’s net debt from $2.26 billion to just over $1.5b, which was in line with its peers, Taylor said.
Fletcher chairman Sir Ralph Norris said: ‘‘it is important to provide all our existing eligible shareholders with the opportunity to purchase new shares in Fletcher Building.
‘‘This acknowledges the continuing support that they have given the company in the last 18 months, and enables them to contribute to the repositioning of the company as the new strategy is rolled out.’’
Fletcher Building is in a trading halt, which will be lifted on Friday.
Rents rise to regional record
Auction website Trade Me Property’s rental statistics for March show the country’s median advertised rent was up 4.4 per cent on last year, to $470 a week. Taking Auckland, Wellington and Christchurch out of the calculation, it was up 6.8 per cent to a record $395. Some regions shot ahead: Hawke’s Bay’s rent prices were up 14.3 per cent year-on-year; Manawatu/wanganui’s were up 10.3 per cent; and Nelson/tasman’s were up 10.5 per cent. Auckland looked to have slowed a little – the city’s median asking rent was up 4.9 per cent for the year but down 1.8 per cent compared with February.
Jamie Oliver chain fails
Jamie Oliver’s dream of buying back the farm in Australia is over. The Jamie Oliver Restaurant Group (Australia) collapsed on Monday, with the company being placed in the hands of voluntary administrators less than 12 months after the British celebrity chef visited Australia to relaunch the six local restaurants bearing his name. Oliver bought them from another failed company in March 2017. Jamie’s Italian Canberra closed immediately on Monday. The remaining five sites, in the Sydney CBD, Parramatta, Brisbane, Perth, and Adelaide, will continue to operate, salvaged by a last-minute sale to Brisbane-based Hallmark Group.
Manufacturing jobs to decline
There will be fewer manufacturing jobs in the long term, but they will be more highly-skilled, a report by the Ministry of Business, Innovation and Employment forecasts. Disruption in the industry is expected to create safer specialised jobs, as robots undertake more hazardous tasks and increase efficiency and profitability. The last 10 years had been a ‘‘game of two halves’’, the report said. Overall manufacturing output declined in the 10 years to 2017, largely due to the impact of the GFC. But the sector’s output has slowly been rising again – a trend mostly driven by food and beverage manufacturing.
Correction
SBS Bank’s one-year deposit rate is 3.5 per cent, not 3.75 per cent as quoted in Monday’s Investment Watch table. The error is regretted.