Ryman chairman Dean Hamilton said the equity raise would reset the company’s balance sheet, reducing gearing from 37.3% to 23.1%.
The offer would provide Ryman with “the foundations to deliver further transformation initiatives, with a renewed focus on its operational reset”.
Shane Solly, portfolio manager at Harbour Asset Management, said the move would allow Ryman to reduce balance sheet risk and would allow it to get on with its restructuring.
About 328m new shares are to be issued under the offer, representing about 48% of the existing shares on issue.
The placement and entitlement offer is pitched at $3.05 a share, representing a 21.9% discount to the theoretical ex-rights price going on Ryman’s closing price of $4.31 on Friday.
The offer is underwritten by Craigs Investment Partners Limited, Forsyth Barr Group Limited and Jarden Partners.
The offer is being conducted today and closes tomorrow. In the meantime, the stock has gone into a trading halt.
Hamilton said the company had already made significant progress over the past 12 months and had moved to a more functional structure.
“Resetting our balance sheet will support us to progress our business improvement programme further.”
Chief executive Naomi James, who joined Ryman in November, said the business improvement programme was focused on releasing cash from the business, targeting $500m over the next three to five years.
Shares in Ryman, a former market high flyer, have fallen by about 8% over the past 12 months.
Last November, Ryman reported that it had halved its net profit after tax and was suffering rising vacancies in its properties, then running at 12.1% empty.
The company made $94.4m net after-tax profit in the half-year to September 30, down from $187.1m in the previous corresponding period.
Jeremy Sullivan, investment advisor at Hamilton Hindon Greene, said it was a prudent move from Ryman, which ranks as a top 10 NZX-listed company by market cap.
“It’s at quite a steep discount. Of course, when you’re raising this level of capital, it’s a $2.9 billion-dollar company raising a billion dollars, so it needs to be attractive.”
Sullivan said the issue would provide long-term stability and growth prospects for Ryman.
He said that falling interest rates, increasing business and consumer confidence, and a recovery in the housing market would benefit the likes of Ryman.
Sullivan said the depressed residential property market was having a big impact on the retirement village sector.
“The reduction in house prices has a large impact on turnover and that’s the lifeblood for a company like Ryman – cashflow.”
Ryman’s investor call revealed that sales in the third quarter were down 40% on the previous corresponding period.
“They are seeing some operational weakness, increased competition, and the housing market is of course still quite slow,” Sullivan said.
Nikko AM research analyst Tim O’Loan said he was surprised that the company had not communicated some growth opportunities along with balance sheet repair, given the size of the issue.
“This is consistent with what we are seeing through reporting season, with companies being cautious in their outlook and not seeing any real green shots in terms of the economic backdrop,” he said.
“There were some qualitative statements made around what future growth may look like, but the guidance provided for medium-term construction delivery shows a muted growth outlook.”
Jamie Gray is an Auckland-based journalist covering the financial markets and the primary sector. He joined the Herald in 2011.
