New Zealand institutional investors have welcomed Fletcher Building's $750 million rights issue, saying it should put the business in a better financial position and the rights issue price was "compelling".
Shane Solly of Harbour Asset Management said: "The capital raise will put Fletcher Building on firmer footings to continue to rebuild its operating business. The new lower gearing target looks prudent. The proposed sale of formica and rooftiles reinforces Fletcher's focus on its core businesses."
Fletcher announced this morning it was seeking $750m from existing shareholders via a highly discounted rights issues. Shareholders will be able to one new Fletcher share for every 4.46 they own. The new shares are priced at just $4.80 each, a 23.4 per cent discount to the price the shares closed at yesterday.
Mark Brown of Devon Funds Management also welcomed the rights issue today, saying it would make a big difference.
"Clearly, the rights issue is being priced at a level which makes it compelling to participate. Strategically it makes sense in so far as Fletcher Building is no longer a forced seller of assets and can clearly deal with debt holders from a position of strength.
"On a positive note it is encouraging to see that guidance has been maintained and buildings and interior projects remain on track. Further detail on the cost-out strategy and asset realisations should be well received at the June strategy update," Brown said.