Fletcher unveils $1.25B refinancing plan
Fletcher Building has unveiled a $1.25 billion refinancing plan to strengthen its balance sheet.
17 April 2018
Fletcher Building has unveiled a $1.25 billion refinancing plan to strengthen its balance sheet after extending talks with US noteholders over a breach of its lending conditions.
The Auckland-based construction and building products company is raising $750 million in an underwritten offer to shareholders at a deep discount and has arranged a $500m stand-by facility with a group of banks.
The stand-by facility can only be used to repay holders of its $1.1b of notes in the US private placement market.
Costs to repay the USPP notes is estimated at up to $125m, or a total of about $1.25b.
Fletcher also announced plans to sell its Formica and steel roofing tiles businesses after a strategic review, retreating to its main New Zealand and Australian markets.
Discussions with noteholders in the USPP market "are ongoing and Fletcher's objective and expectation is that it will achieve a mutually acceptable outcome," it said.
It expects to reach an agreement with noteholders by May 31.
"Fletcher has got themselves into a lot of problems and they need to get out of them," said Paul Richardson, chief investment officer at Mint Asset Management.
"The USPP holders, not surprisingly, are standing up for their rights."
Fletcher's stock has been buffeted the past week by rumours that the company has become a takeover target, with Wesfarmers reportedly among interested parties.
Richardson said regulators may want to take a look at some of the speculation to ensure it hasn't amounted to market manipulation.
The pro-rata one-for-4.46 accelerated entitlement offer is at $4.80 a share, or 23 per cent below its last trading price of $6.27.
The stock was halted for the capital raising. Proceeds from the offer will be used to repay existing debt, the company said.
The stock sank to $5.74 on April 4, the lowest level in almost six years. It was as high as $11.14 in September 2016.
Fletcher said it has obtained a new $500m stand-by facility that runs until at least January 2020 with ANZ Bank, Mitsubishi UFJ Financial Group and Westpac Banking Corp, and has obtained commitments "from the required majority of lenders to a permanent solution of the current breach under the syndicated facility agreement".
Formica and Roof Tile Group fall within Fletcher's international division along with its Laminex business in Australia and New Zealand.
In February, Morningstar valued the international division at $1.36b and Formica alone at $730m.
The analytics firm suggested Formica would be a candidate for sale as a non-core asset.
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