Regional REIT launches £110.5m capital raising to stave off bankruptcy
Regional REIT has proposed a new share offer to raise around £110.5m as the troubled UK office real estate investment trust tries to deal with its debts.
The company said the raise would be fully underwritten by Bridgemere, part of the Bridgemere group of companies established by Redrow founder Steve Morgan. It also said it would undertake a one-for-10 share consolidation.
The 1,105,149,821 new ordinary shares are to be issued at 10p per share – a discount of 50.4 per cent to the last closing price of 20.2p and 82.3p to the company’s last published net tangible asset value per share.
In March, the REIT said a “material discount” would be likely if it did go ahead with an equity fundraising amid fears that it was strapped for cash ahead of £50m in retail bonds maturing in August.
The REIT said on Thursday that the new fundraising would enable it to repay the bond fully. Its shares plummeted as much as 30 per cent in early trading.
It added that a further £26.3m of the proceeds would be used to reduce bank facilities, while the remaining £28.4m would “provide additional flexibility to fund selective capital expenditure on assets, which will enhance earnings in the near term and value in the mid to long-term, further underpinning quarterly dividends going forward”.
Kevin McGrath, Regional REIT’s chair, said the decision to pursue an equity raise came after “a comprehensive review of a wide range of options to accelerate a reduction in indebtedness”.
“The capital raising, supported by Bridgemere, will enable the company to strengthen significantly Regional REIT’s financial position, reducing indebtedness and provide the company with greater financial flexibility and liquidity headroom,” he added.
Following the Covid-19 pandemic, the REIT’s loan-to-value (LTV) ratio rose to 56.8 per cent against a target of less than 40 per cent.
Stephen Inglis, chief executive of asset manager London & Scottish Property Investment Management, said the fundraise “provides the best long-term solution to the upcoming retail bond refinancing, will put the company on a sound footing reducing the LTV to approximately 40 per cent and provide the flexibility to fund capital expenditure on assets to maximise value and income for shareholders over the long term”.