Fletcher launches refinancing
FLETCHER Building has launched a $1.25 billion refinancing package, with a fully underwritten $750 million offer to shareholders and has negotiated a new $500 million standby banking facility.
Fletcher shares were placed on a trading halt yesterday.
The standby $500 million facility, with ANZ, Westpac and MUFG Bank, can be used only to help fund repayment of US Private Placement notes worth $1.11 billion.
Fletcher, which broke some banking covenants, has until the end of the month to conclude negotiations with USPP, or redeem the notes.
Against a backdrop of its lowest share price in a decade and swirling speculation on the possibility of takeover offers, Fletcher yesterday unveiled the package, which includes assets put up for sale.
They include its Formica division and Roof Tile businesses, which respectively last financial year had earnings before interest and tax (ebit) of $88 million and $13 million.
Fletcher said yesterday ‘‘discussions with the USPP noteholders are ongoing and Fletcher’s objective and expectation is that it will achieve a mutually acceptable outcome in the negotiations’’.
During the past two years, accumulated and estimated losses from its Building + Interiors (B+I) division have hit $952 million, while Fletcher’s market capitalisation has taken a $1.6 billion hit, as the B+I issue unravelled during the past six months.
The prorata one sharefor4.46 shares offer to shareholders is at $4.80 a share, a 23% discount on its last trading price of $6.27.
Proceeds from the $750 million placement would be tagged to pay bank debt of $714 million.
Craigs Investment Partners broker Peter McIntyre said Fletcher had ‘‘covered all its bases’’, in recapitalising through the placement, selling assets and the standby bank facility.
It was now in a position to redeem the USPP notes if they were called in; plus pay costs if required.
‘‘It’s enough to steady the ship for now,’’ he said.
He said there was ‘‘potential’’ for more asset sales, but Fletcher was now in a position where it did not have to make ‘‘forced sales’’, as discounted prices.
He believed the 23% ‘‘deep discount’’ to existing shareholders would be attractive for them to participate.
Forsyth Barr broker Damian Foster said there were ‘‘more moving parts than expected’’ in the announcement, with the spread of capital raising, assets sales and new standby banking facility.
‘‘[However] it should all come together and put the company back in a good position,’’ he said.
Mr Foster said given the ‘‘deep discount’’ on the offer price, shareholders would be expected to support it, or face their own stakes becoming diluted by the extra shares on issue.
Fletcher said its strategic business review was progressing and it was focusing its activities on New Zealand and Australia, prompting the Formica and Roof Tile sales.
B+I’s estimated $660 million loss was unchanged, with Fletcher updating that five projects were complete, including lossmaking Justice precinct in Christchurch and seven were targeted for completion by yearend.
Four more were still under construction, including the international conference centre in Auckland and adjacent hotel; responsible for much of the B+I losses.
Fletcher reiterated earlier guidance, with no change to an estimated earnings before interest and tax of between $680 million and $270 million; which excludes the B+I full year 2018 loss of $660 million and other significant items.
Mr McIntyre said the remaining four B+I projects were trading within provisions made in midFebruary.
‘‘However, the infrastructure segment is facing risks in its Puhoi to Warkworth [roading] project and at this point Fletcher is reporting ‘nil’ margin,’’ he said.
He noted the project was a 50:50 joint venture.