Stobart Group has announced its intention to raise between £80 million and £100 million via a rights issue priced at between 35 and 40 pence per share as it seeks to plug the gap in its finances from the collapse of the sale of part of its stake in Southend Airport.
Talks between the infrastructure and aviation group and AviAlliance, a Germany airport operator with facilities in Athens, Budapest and Puerto Rico, to sell a 25% stake in Southend Airport for £200 million fell through in March as the impact of the COVID 19 started to become clear.
Stobart intends to use the net proceeds from the capital raise for general corporate purposes, including, repayment of certain amounts drawn under the RCF and short-term stabilisation and maintenance of the company by supporting the Aviation and Energy business
“A detailed operational and financial review was conducted during 2019 which set out a clear path to maximising long term value for the Group’s shareholders,” the company said in a statement announcing the share issue.
“As a result, the Group announced in November 2019 it would be suspending its dividend and that it had commenced a process to obtain new long-term debt to fund its growth investment programme. In parallel, as announced on 17 March 2020, the Group explored the option of raising financing through the sale of a minority investment in London Southend Airport,” it added.
However despite being on track to secure both an enlarged debt facility, as well as being engaged in advanced discussions in relation to an investment in London Southend Airport the negative impact from the COVID-19 pandemic on both Flybe and the wider group meant Stobart was unable to access either source of funding.
“The Group has taken a series of mitigating actions to help preserve cash flow through this period of uncertainty, however with the business currently suffering from the severe negative impacts of the pandemic, the Group requires additional liquidity both to fund the Group’s short-term cash obligations and to enable it to build a strong foundation from which it can return the Aviation business to growth and deliver on its longer-term strategic ambitions,” the statement said.
Canaccord Genuity is acting as joint sponsor, joint global co-ordinator, joint bookrunner and corporate broker and UBS is acting as joint sponsor, joint global co-ordinator, joint bookrunner and financial adviser
The capital raise will be fully underwritten by the joint bookrunners on closing of the bookbuild.