Freightways joins dash for cash with $50m share issue

New Zealand listed companies' dash for cash continued yesterday with Freightways following in Fletcher Building's footsteps with a much smaller but similarly structured $50 million capital raising.

The package and document management company, which appears to be weathering the downturn relatively well, yesterday raised $45 million in a placement of new shares to institutional investors.

The transaction, fully underwritten and managed by Goldman Sachs JBWere, issued new shares at $2.44 each - about a 12 per cent discount to their closing price of $2.78 on Monday afternoon.

Freightways shares will begin trading again this morning after confirmation of the allocation of stock in the placement.

By late afternoon yesterday the Herald understood the book was full after meeting with solid but not spectacular demand.

A $5 million Share Purchase Plan (SPP) will follow late this month, open to "eligible" shareholders, allowing them to buy shares at the same price as the placement or the volume weighted average price over the five business days leading up to the opening of the SPP.

The SPP was a similar arrangement to those forming part of recent capital raisings by Fletcher Building and Kiwi Income Property Trust and had been structured to ensure that up to 90 per cent of shareholders would have the opportunity to take part if they wished without their holding being diluted, Freightways chief executive Dean Bracewell said.

The overall purpose of the capital raising was to reduce bank debt and strengthen the company's balance sheet, he said.

"This re-geared balance sheet will result in Freightways being positioned with greater financial flexibility to operate through the current economic downturn and also creates funding headroom to be able to explore future growth opportunities should they arise."

As at the end of last year, the company had net debt of $216.3 million, all held by Westpac and ANZ banks. That will be reduced to $171.3 million following the placement.

But Bracewell indicated the company was under no pressure from its banks.

"Our banks are supportive, this is a proactive measure, we're certainly not reacting to anything at all other than the uncertain economic environment.

"We've got a board and management that in these times feel we should have a more conservative capital structure than we've had in the past and that's what we've positioned for. Time will tell if that degree of conservatism was required."

Several weeks ago the company reported a December half net profit of $16.9 million, up 1 per cent on a year earlier, with revenue up 10 per cent to $177.4 million.