Shareholders shy away from two rights issues: Costain and Budgens fail to win support

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TWO rights issues were given an emphatic cold shoulder by investors yesterday, with both Costain and Budgens attracting the support of a minority of their shareholders.

Costain's second rights issue in two years, a five-for-four call to raise pounds 84m, was taken up by just 28.1 per cent of the construction company's shareholders. More than 200 million shares have been left with the issue's sub-underwriters.

Sir Christopher Benson, chairman, said: 'While there has been a low level of take-up, the sub-underwriters include several large institutions which have reiterated their support as shareholders of the group.'

The cash call, announced in September with the company's half- year figures, will reduce gearing from 130 to 51 per cent. The shares were unchanged at 29.5p compared with a rights price of 30p.

Fewer than a third of shareholders in Budgens, the food retailer, took up its pounds 29.7m offer of convertible unsecured loan stock. Rewe, the German discount retailer which holds a 29.35 per cent stake, took up its full entitlement and, as underwriter, will subscribe for the remaining 67.1 per cent.

The loan stock can be converted into ordinary shares from September 1995 and, if Rewe chooses this option, its stake in Budgens will increase to 46.2 per cent.

Christian Williams, a Budgens director, said he was not disappointed by the take-up. He said: 'From the company's point of view the question is, have we raised the money in the most efficient and cheapest way? The answer is yes.'

Because Rewe was underwriting the issue, the terms were very attractive, he said. The loan stock carries a coupon of 5 per cent and is convertible at an effective price of 55p, an 11p premium to yesterday's closing price.

The funds will be used to accelerate the opening of Penny Market discount stores, modelled on the 1,800 Penny Markt stores operated by Rewe on the Continent. Nine are already trading and a further 30 are planned in the next two years.