UTV Media yesterday shocked investors with the announcement of plans for a £49.9m rights issue that it hopes will reduce the group's debt to a level more appropriate to the post-credit-crunch world.
The Northern Ireland-based owner of radio station TalkSport will issue two new shares for every three already in existence, at a price of 130p, or about 39 per cent of Tuesday's closing price, it said. It has also agreed new five-year financing arrangements.
Turbulence in the financial markets merely accelerated the re-financing due at the end of the summer, said John McCann, the chief executive of UTV. However, the move sent its shares plummeting more than 20 per cent. "The company is in a good position and was in no danger of breaching its covenants," he said. "But with concern about the movement in the credit markets, and with the possibility that the situation might worsen in the coming six months, we decided we would like some certainty in our financing."
Over the past seven years, UTV has been on a spending spree – transforming itself from a regional television operator to a new media and radio company.
The acquisitions were funded by debt finance, leaving the company with gearing at about four times its earnings. Following the £49.9m rights issue, net debt will come down to nearer three times earnings.
Last month, the group reported like-for-like revenues up 4 per cent for the four months to April, including a massive 19 per cent year-on-year rise at TalkSport.
Even with the new funding, UTV is not necessarily out of reach of the crunch. "Realistically we believe it would have had problems getting funds at decent rates without it," Steve Liechti, an analyst at Investec, said.
The shares closed down 21.4 per cent at 167.5p.Reuse content