Fletcher seeks $750m from in­vestors

The Dominion Post - - Business - ROB STOCK

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.

PHOTO: DAVID WHITE/STUFF

In­com­ing CEO Ross Tay­lor, left, and out­go­ing chair­man Sir Ralph Nor­ris fronted to me­dia over Fletcher Build­ing’s losses in Fe­bru­ary.

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