Segro has launched a £500.6m deeply discounted rights issue to raise cash to shore up its balance sheet.
The industrial REIT this morning said it would raise equity by issuing 5,241m shares at 10p a share on the basis of 12 new shares for every one held.
It will reduce Segro’s gearing from 119% to 77% and reduce the risk of it breaching its loan covenants due to falling property values.
The issue price of 10p a share reflects an 86.9% discount to Segro’s closing share price yesterday of 76.6p a share.
Merrill Lynch International and UBS are fully underwriting the rights issue as joint bookrunners, and Barclays Capital, HSBC, RBS Hoare Govett and Societe Generale Corporate & Investment Banking are acting as co-lead managers.
Segro is the fourth REIT to join the race for equity, following the examples of Hammerson which raised £584m, British Land which raised £740m and Land Securities which raised £755.7m.
The equity raising followed the announcement last week that it had signed agreements with its banks to increase the maximum gearing covenant on its £1.7bn debt from 125% to 160% to provide ‘additional headroom’ in the difficult market.
Ian Coull, chief executive at Segro, said:
‘The rights issue, combined with the increase to our gearing covenant, will help protect Segro from further falls in property values.
'The net proceeds of the rights issue will be used to pay down some of Segro's debt facilities and will result in a reduction of Segro's gearing from 119 % to 77% (on a pro forma basis as at 31 December 2008).
'Segro will continue its strategy of asset recycling with increased flexibility to take advantage of opportunities in a cautious manner when the market recovers.’
It also announced that it would be reducing the final dividend payment to shareholders of 5.4p a share, while the total dividend for the year would be 13.7p a share – down from 23p a share at the same time in 2007.
In its end of year results, also announced this morning, it announced a pretax loss of £939.2m which it said was largely a result of property writedowns following an 18% fall in the value of its investment properties at 31 December last year.
The REIT’s adjusted diluted net asset value fell 31.5% to 482p.
Its shares rose 7% this morning to 87.75p a share following the announcement.