Paragon shares dive on £287m cash call

Click to follow
The Independent Online

Shares in Paragon, Britain's third largest buy to let mortgage lender, plunged almost 40 per cent yesterday, as the company revealed it was pushing ahead with plans to raise £287m in a heavily discounted rights issue.

The rights issue is fully underwritten by UBS, and the proceeds will be used to pay off the company's £280m secured revolving credit facility.

Investors who take up their rights will be offered 25 new shares for each one they own, while the group will also carry out a share consolidation that will leave shareholders with one new share for every 10 existing shares. The proposals will be voted on at an extraordinary general meeting to be held on 28 January.

Paragon warned investors in November that it may need to come to the equity markets to raise the capital it needed to refinance its debts. It said that it already had the backing for a £280m rights issue from its bankers UBS, but hoped that it would not need to use it.

Paragon's chairman Robert Dench said yesterday that the company had decided to push ahead with the rights issue to bring greater certainty to the business. "The rights issue announced today provides Paragon with financial stability and secures the value inherent in the group today for its shareholders," he said.

"The board believes the rights issue will provide Paragon with a platform from which it can pursue further funding, so the company can return to writing significant volumes of profitable business when credit markets reopen. We are very grateful to our leading shareholders for the support they have shown the group and its management during the recent period of uncertainty and look forward to the future with confidence."

Shares in Paragon finished the day down 39.7 per cent at 61.5p yesterday. They hit highs of 767.5p in March 2006. The company's market value is now £70.6m.

Comments