Liberty surprises market with £159m rights issue

Liberty International, the UK's fourth-largest property company and the owner of the Lakeside shopping centre, yesterday raised £159m from a surprise rights issue that could see it propelled in to the FTSE 100.

The capital-raising by the company, which has little debt on its balance sheet, was not expected by the market and its shares closed down 2.5 per cent at 565p.

It leaves the company valued at £1.6bn and puts it on the cusp of joining the FTSE 100 index. Liberty has expressed desires to break in to the FTSE 100, although analysts dismissed this as being the primary motive for the issue.

Morgan Stanley backed the rights issue, and 28.4 million new ordinary shares were placed at 560p a share, raising about £159m. This was a 3.4 per cent discount to the 580p closing price on Tuesday. The new ordinary shares represent about 10 per cent of Liberty's share capital before the issue.

"Despite the turbulent conditions currently prevailing in the markets, our chosen sectors in the real estate markets, notably our shopping centre and retail businesses, have continued to produce a very sound outcome," said Donald Gordon, chairman of Liberty.

Mr Gordon bought a sizeable chunk of the share placing himself, through the investment company that already owns about 19 per cent of Liberty. The Gordon Family Trust will take up 8 million shares.

Mr Gordon said the money raised would go towards keeping the company's borrowings at a minimum as well as financing a range of new investment and development projects. Liberty is seeking to add retail sites in about 25 locations throughout UK.

The group has a property portfolio worth £4.2bn and owns six of the UK's top 15 shopping centres, including the Metro Centre in Gateshead and Braehead in Glasgow. Liberty bought out the remaining stake in The Victoria Centre in Nottingham this week and has sites for shopping centres in Oxford and Cardiff at planning stage.

Analysts are seeing the capital-raising as an opportunistic move by Liberty to put money in the bank while it can, rather than be forced to raise capital when planned developments start to eat in to funds.

This is the first equity raising by Liberty in 10 years. Analysts said some of the investors taking up the issue were new to the company, meaning Liberty has managed to attract fresh interest in the group. "Equity fund managers have seen that the stock has done well and is backed by substantial assets. Very little else offers a 4 per cent yield at the moment and the current price looks fairly safe," one analyst said.