Capital Raising Announcements Increase

Submitted by Share Trading on 11 December, 2008 - 14:45

As a result of the economic slowdown, many companies in the recent past have announced capital raising programs. About 28 companies in the first half of 2008 and 49 companies since June have increased their capital and majority of them managed to stabilise their balance sheets. This was not the case in the recent years as balance sheet stabilisation was not a big portion of companies.

Westpac Banking Corporation (WBC), on Tuesday announced a capital raise of $2.5 billion to strengthen its balance sheet. Yesterday, BlueScope Steel Ltd (BSL), a top steel maker of Australia has announced a capital raising of $300 million to prop up its balance sheet as domestic market for its product goes down.

BlueScope said in a statement that trade in its shares will be in a trading halt until Thursday or pending an announcement about the completion of the initiatives. The company will also carry out a share purchase plan of $3.10 per share for its retail shareholder which comes to about $250 million but this may change. It signifies a 23 per cent discount to its last traded price. The underwriters of the deal are said to be JP Morgan and Credit Suisse.

BlueScope chief executive Paul O'Malley, on October warned investors that the company's second half of fiscal year would be challenging because of weak economic conditions. The decision of raising share capital was also influenced by the view that the $210 million sale of its New Zealand Iron Sands business to property developer Cheung Kong (Holdings) Ltd would not be settled when expected.

BSL Managing Director Paul O'Malley has said, "As we have came out the back of November we have seen between a 15 and 25 percent drop in demand for products in Australia". The company said that the capital raising would reduce its gearing to 33 percent from 37 percent at the end of October.