Fletcher to raise $750M selling shares at deep discount

Cornelia Mascio
Aprile 17, 2018

New Zealand's Fletcher Building announced a NZ$1.25 billion ($920 million) refinancing plan and the proposed sale of its Formica and steel roofing tiles business on Tuesday, while dismissing a report it had become a takeover target.

Meanwhile, Fletcher Building's new (ish) CEO Ross Taylor announced this morning the company has made a decision to focus its activities on New Zealand and Australia, and as part of that strategy will sell its Formica and Roof Tile Group businesses.

Fletcher has been gutted by $660 million losses in its Buildings and Interiors Division due to big cost overruns on constructions projects like the International Convention Centre and the now-completed Justice Precinct in Christchurch.

In a trading update released with today's announcement of a $NZ750 million capital raising, Fletcher said Wesfarmers "has confirmed to Fletcher Building that it does not hold shares in Fletcher Building".

Fletcher says it has obtained commitments from the majority of its lenders to a permanent solution of its breach under its syndicated facility agreement and has established a new standby facility of $500m with ANZ, MUFG Bank and Westpac.

He said the company would now concentrate on New Zealand and Australia businesses.

Discussions with its United States private placement (USPP) lenders are continuing and "Fletcher Building's objective and expectation is that it will achieve a mutually acceptable outcome".

Although it doesn't expect to need the new standby facility, it and the rights issue proceeds are sufficient to redeem all its USPP notes and to cover any associated costs.

It expects to reach an agreement with noteholders by May 31.

At the end of March, Fletcher said it had gained an extension to waivers from its banks and USPP lenders to the end of May.

The firm reiterated its estimate for earnings before tax estimate of NZ$680 million to NZ$720 million for the full year.

"An outcome of the work that we have completed to date on the group strategy is that it is now appropriate to strengthen our balance sheet", chief executive Ross Taylor said. "Reducing our net debt also provides us with the opportunity to undertake divestment processes for Formica and the Roof Tile Group on terms that should maximize shareholder returns".

"The offer will comprise institutional and retail entitlement offers, with any entitlements that are not taken up by eligible shareholders and entitlements of ineligible shareholders being offered for sale in the institutional and retail book builds respectively", it said.

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