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Regional REIT Limited (LSE:RGL), a specialist in regional property investment, has unveiled a significant capital raising initiative, totaling approximately £110.5 million. This strategic move involves a fully underwritten Placing, Overseas Placing, and Open Offer of 1,105,149,821 New Ordinary Shares at an issue price of 10 pence per share. Additionally, the company has announced a 1-for-10 Share Consolidation to streamline its share structure. The capital raising effort is fully underwritten by Bridgemere Investments Limited, a company within the Bridgemere group established by Steve Morgan CBE.
Strategic Capital Raising to Strengthen Financial Position
The capital raising will enable Regional REIT to fully repay its £50 million Retail Bond, thereby eliminating this short-term liability. This move will also reduce the financial constraints associated with the requirement to pay coupon distributions on the Retail Bond. By addressing this debt, the company aims to enhance its financial flexibility and stability.
Utilization of Funds for Debt Repayment and Asset Enhancement
A portion of the raised capital, amounting to £26.3 million, will be allocated towards reducing bank facilities. This reduction will provide greater headroom under the covenants of these facilities, improving the company’s financial metrics and stability. The remaining £28.4 million will be used to fund selective capital expenditures on assets. These investments are expected to enhance earnings in the short term and increase asset value in the mid to long term, thus supporting the sustainability of quarterly dividends. Overall, these actions will reduce the company's Loan-to-Value (LTV) ratio from 56.8% to 40.6%, based on valuations as of 21 June 2024, as outlined in the Valuation Report.
Share Consolidation to Improve Market Position
In conjunction with the capital raising, Regional REIT is implementing a 1-for-10 Share Consolidation. This move is designed to streamline the company's share structure, making it more attractive to investors and improving market perception. By consolidating shares, the company aims to enhance the trading liquidity and potentially reduce share price volatility.
In summary, Regional REIT’s £110.5 million capital raising initiative marks a strategic effort to strengthen its financial position, repay significant debts, and invest in value-enhancing asset improvements. Coupled with the share consolidation, these steps are expected to support the company's growth objectives and enhance shareholder value in the long term. The involvement of Bridgemere Investments Limited underscores the confidence in Regional REIT's strategic direction and future prospects.
