The company said it had already identified pounds 31m worth of land suitable for housing development. The rest of the money will initially be used to pay off borrowing and fund work in progress. But David Wilson, chairman and chief executive, said it would all eventually be spent on land.
Borrowings are at pounds 39m, equivalent to 23 per cent of net assets. Mr Wilson said the company would have net cash balances by the year- end, but he was happy to see gearing rise again to 25 per cent.
Bowden is planning a one-for- five share issue at 375p. The share price fell yesterday - but by a small enough margin to indicate a positive reaction from the stock market. Shares closed down 8p at 439p.
Mr Wilson said the objective behind the cash-raising exercise was to increase the number of building sites from 77 to 90. The company also has ambitions to build 2,500 houses a year; it hopes to build 1,800 this year.
Activity levels have risen sharply since the change in the Government's interest rate policy in September 1992. Bowden has built 40 per cent more houses so far this year than it did in the comparable previous period.
Bowden has emerged from the deep recession in the construction industry with a better reputation than most of its quoted rivals. While profits fell sharply between 1989 and 1992 the company stayed in the black by a comfortable margin. Taxable profit for the 12 months to last December was pounds 16.9m and a recovery to about pounds 24m is expected this year.
Analysts said the cash call would attract widespread support but cautioned that land prices were rising quickly. 'In some parts of the country it looks like prices are getting over-cooked,' one said.
'Land prices are rising but housebuilders are not winning price rises for completed developments. Some could be squeezed,' he added.
Mr Wilson responded angrily to the possibility that the Chancellor might abolish tax relief on mortgage interest payments. 'I would be furious if he did,' he said. 'Both the present Chancellor and his predecessors have promised time and again that Miras would be protected.'
This rights issue is underwritten by Schroders. In March 1991 Bowden raised pounds 34m via a rights, which was also used to buy land. Bowden shares have performed badly in the intervening period, underperforming the stock market average by 15 per cent.