- The GVC is likely to propel liquidity challenges, encouraging companies to strengthen balance sheets, seek additional debt funding & raise capital.
- Iress Limited, Vicinity Centres & Boral Limited have joined the bandwagon of ASX-listed companies to raise capital amid COVID-19.
Market consensus believes that the COVID-19 pandemic will have an unprecedented influence on the global economy and are fearing that a Global Virus Crisis (GVC) looms over us. For instance, with more people shifting to the online revolution and depending on digital platforms to shop, entertain, even study and work, some companies might seek growth capital to transition to this new environment, the “new normal”.
Not to forget, there is possibility of liquidity challenges in the months ahead which calls for a need for businesses to strengthen their balance sheets, seek additional debt funding, raise capital from existing shareholders, raise debt or equity capital from new strategic investors.
In this backdrop, let us cast an eye on three ASX-listed stocks that have been successful in garnering market attention for recent capital raisings- Iress Limited (ASX:IRE), Vicinity Centres (ASX:VCX) & Boral Limited (ASX:BLD)-
Iress Equity Raising Targeting $ 170 Million
On 1 June 2020, IRE, a technology company providing software to the financial services industry, announced the launch of an equity raising to help further strengthen its balance sheet, offer flexibility to react to prospects amid COVID-19 and partly fund the proposed acquisition of OneVue Holdings Limited (ASX:OVH), which was also announced on the same day.
The OneVue acquisition was considered based on debt funding and was achievable with available debt. However, IRE has decided to adopt a more conservative funding strategy owing to the ongoing market turmoil.
The Company is undertaking a fully underwritten placement of $150 million to institutional and sophisticated investors along with a non-underwritten Share Purchase Plan to eligible shareholders to raise ~ $ 20 million. The placement, being conducted on 1 June 2020, is likely to result in the issue of ~ 14.4 million new shares, representing ~ 8.2% of the Company’s existing ordinary shares on issue.
IRE last traded at $11.21 on 29 May 2020. The Company’s shares are in a trading halt and trading is expected to recommence on 2 June 2020. The Placement Shares are likely to settle on 4 June 2020. They will be issued and commence trading on 5 June 2020.
OneVue Acquisition Highlights
IRE and OneVue, a company that has built an essential technology and service offering in the Australian market, entered a binding Scheme Implementation Agreement as per which, IRE will acquire 100% of the shares in OneVue for $ 107 million. OneVue shareholders will receive $ 0.40 cash per share. According to OneVue’s MD Connie Mckeage, the offer represents a significant premium to OneVue’s current share price, and a full cash offer provides compelling certainty for its shareholders.
Implementation of the deal is expected in Q320, subject to shareholder, regulatory and other approvals.
Placement & Acquisition details (Source: IRE’s Report)
Vicinity Centre’s $1.2k Million Placement, Dividend & Operational Update
One of Australia’s leading retail property groups, VCX announced a fully underwritten institutional placement to raise $ 1,200 million at a fixed issue price of $ 1.48 per security and a non-underwritten Security Purchase Plan to raise up to a further $ 200 million.
Moreover, the Gandel Group has committed to subscribe for a supplementary $ 100 million of new securities in the placement. Following the placement, the Company will have $ 2.6 billion of available liquidity (31 December 2019 pro forma).
The objective of the capital raise is to strengthen the Company’s balance sheet, provide flexibility to react to COVID-19 uncertainties and be better prepared for the evolving retail landscape, while supporting the continuation of investment-grade credit ratings.
Further information on the SPP will be lodged with the ASX and forwarded to eligible securityholders on or around 9 June 2020.
Moving on to other aspects, the Board has decided that in order to further strengthen the balance sheet, VCX will not pay any distribution for the six months ending 30 June 2020.
On the operations end, 49% of billings have been received, for the period between March to May 2020, which is broadly in line with Company expectations. The Company expects rent receipts to improve with re-opening of stores, increase in foot traffic (now 74 % of the prior year, from a low of 50 % in April 2020) and completion of lease negotiations.
CEO & MD Mr Grant Kelley stated that the equity raising, coupled with cost and capital reductions will substantially strengthen the Company’s financial position and offer investors with the capacity to invest in its assets.
VCX last traded on 29 May 2020 at a price of $1.61. The stock is under trading halt currently, pending it issuing an announcement, and is anticipated to begin trading again by 3 June 2020 or post the announcement is made.
Boral’s Completion of New US Private Placement
An international building products and construction materials group, BLD intimated that it has successfully completed its new US Private Placement (USPP) note issue of US$ 200 million in line with its previous agreement about the USPP. The senior, unsecured note issue consists of two tranches with five and seven-year bullet maturities. The average coupon of 4.49 % and T&C are in line with BLD’s existing USPP notes.
Besides this, BLD has completed the execution of its new bilateral two-year bank loan facilities totalling ~$ 365 million, new bilateral loan facilities of US$ 740 million, maturing in June 2024. The loans replace its US $750 million debt facility that was due to mature in July 2021.
BLD quoted $ 3.20, by the end of the trading session, up by 6.753 % from its previous close on 1 June 2020.
Currently, many public companies are facing (or might face) reduced cash flows, limited access to credit markets and other settings that create liquidity concerns. With global equity markets severely impacted by the coronavirus, the period of significant market volatility may make it difficult for public companies to raise capital, particularly through traditional public offerings.
However, given a belief that the biggest change lies in not money, but appetite for uncertainty, the above discussed companies have taken the step to weather the storm.
(Note- All currency reported in AUD unless otherwise stated)