Segro unveiled a hugely discounted £500m rights issue yesterday to strengthen its balance sheet, as the industrial property company was forced to trim its final dividend after posting tumbling losses of just under £1bn.
Segro said it would use the £500.6m of proceeds from the fully underwritten cash call to reduce its net debts, which were £2.5bn on 31 December. The company will offer 12 shares for one at 10p a share. The capital raising will see its gearing – net debt to equity – fall from 119 per cent to 77 per cent.
"Today's rights issue strengthens Segro's balance sheet at a time when the property market and wider economy are facing significant turmoil," Ian Coull, the chief executive of Segro, said.
Last week, Segro said it had agreed with its lenders to increase the gearing covenant on its banking facilities from 125 per cent to 160 per cent.
The price of 10p a share is at an 86.9 per cent discount to Tuesday's closing price of 82p. Following the news, Segro's shares rose by 15p, or 18 per cent, to 94.01p. However, Keith Crawford, an analyst at KBC Peel Hunt, warned, "we suspect there may be a relief rally following this much-awaited issue" and that, with 6.7 per cent of the company's stock out on loan, short-sellers may be covering their positions.
"While the dilution of value is great at the issue price, Segro has managed to raise a substantial amount of cash, and beaten its contemporary Brixton to the market," Mr Crawford added.
Segro's rivals Land Securities, British Land and Hammerson have all made cash calls this year, but Brixton has yet to make such a move.
For the year to 31 December, Segro delivered a pre-tax loss of £939m, following a loss of £246m in 2007. A decline of just over £1bn on the value of its property portfolio accounted for the lion's share of the loss.
Its total net rental income rose by 20 per cent to £245m. Segro is cutting its final dividend to 5.4p, giving shareholders a full-year payout of 13.7p, a drop of 40 per cent from the previous year.Reuse content