Wesfarmers Ltd shares remained in trading halt today after it confirmed it was considering an equity raising - expected to be a rights issue - to refinance $4 billion in bridging finance used to fund its $20 billion takeover of the Coles last year.
Wesfarmers Ltd shares remained in trading halt today after it confirmed it was considering an equity raising - expected to be a rights issue - to refinance $4 billion in bridging finance used to fund its $20 billion takeover of the Coles last year.
Shares in Australia's second biggest retailer went into a trading halt today as it reviewed its finance options amid intense speculation it was now favouring a rights issue to cover its obligations.
Two weeks ago the Perth-based conglomerate announced it was raising $US650 million (A$710 million) following the successful pricing of a bond issue in the US.
But the bond issue covers less than one quarter of the bridging finance due in October 2008.
Markets sources said the interest rate on the bond issue, translated back into the local market, was effectively around 11 per cent.
The comparatively high price for that debt now made an equity raising a more attractive proposition, although it also meant current investors would see their holdings diluted, one source said.
Wesfarmers may also try to convince its lenders to roll over a proportion of the outstanding bridging finance.
Wesfarmers boss Richard Goyder said the company had decided to go into a trading halt as speculation over its re-financing plans increased.
The Australian newspaper's website reported today that the equity raising being considered would be a renounceable rights offer to raise $2.5 billion.
Large investors would be offered shares at $29 each with retail investors to get a prospectus at a later date.
Mr Goyder said, "if Wesfarmers were to choose to pursue an equity raising .. it would strongly favour an outcome that would give all eligible existing shareholders the opportunity to participate."
Wesfarmers shares last traded at $36.97. The trading halt is expected to be lifted on Monday.
An annoucement from Westfarmer is pasted below:
Wesfarmers has been granted a trading halt by the Australian Securities Exchange following media speculation about the company's plans to complete the refinancing of its Coles acquisition bridging facility.
Managing Director Richard Goyder said that while the company was well advanced in preparations for completing the debt refinancing due by October this year, it was not yet in a position to announce details of its intentions.
"We have consistently said we are considering a range of options to complete the refinancing," he said.
"Today's prominently-placed Australian Financial Review article has the potential to generate further speculation on which we would not be able to provide guidance to our shareholders and the broader market."
"We therefore decided the most responsible course of action was to apply for a trading halt."
"We expect to be able next week to advise the market of our plans."
"If Wesfarmers were to choose to pursue an equity raising, as suggested in today's newspaper report, it would strongly favour an outcome that would give all eligible existing shareholders the opportunity to participate."
Wesfarmers remains in a trading halt as announced by the Australian Securities Exchange earlier today.
