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 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 might be needed if a deal could not be struck with the company’s US debt backers.
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 had reviewed all its troubled building projects, five of which – including Christchurch’s Justice Precinct – are complete.
No further losses on the projects were identified, and Fletcher 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.
Incoming CEO Ross Taylor, left, and outgoing chairman Sir Ralph Norris fronted to media over Fletcher Building’s losses in February.