Freightways to raise $50m to cut debt

By Paul McBeth

Tuesday 7th April 2009

Freightways, the logistics company that owns New Zealand Couriers, is seeking to raise $50 million in a bid to reduce debt and strengthen its balance sheet.

The company aims to raise $45 million through a fully underwritten institutional placement at a 12.4% discount of $2.44 per share. Freightways is seeking a further $5 million through a "Share Purchase Plan" offered to existing shareholders at a lower rate. Its stock fell 1.1% to $2.78 before trading was halted this morning.

"This re-geared balance sheet will result in Freightways being positioned with greater financial flexibility to operate through the current economic downturn," the company said in a statement. It "also creates funding headroom to be able to explore future growth opportunities".

If the raising is successful, it will reduce the company's net debt to $171.3 million, or 57% of book equity from 72%. Freightways reported a 1% gain in net profit to $16.9 million for the six months to December 31.

The company cut its dividend to eight cents from 9.5 cents, but is not contemplating a change to its dividend policy in the near term.

It noted the current economic downturn had created uncertainty as one of the reasons for its reduced dividend in its Capital Management Initiatives presentation. Another was expenditure requirements for two significant property developments and several business acquisitions this year.

A number of companies have issued placements this year in improve their balance sheets as the country's economic outlook remains uncertain. Most recently Fletcher Building, Nuplex Holdings and Xero announced share issues as they deal with the current economic downturn.

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