So far Fairfax has raised around half a billion dollars from major shareholders, which will go to pay down debt, which in many cases, is held by the bank parents of some of the big fundies who topped up the company’s raising: like Colonial (Commonwealth), MLC, (NAB), BT (Westpac) and ANZ (49% of joint venture with ING).
It’s highly ironic that in the $12 billion or so raised in the past six months by local companies looking to raise more cash, most has come from local super funds and other managers, with the demand by banks for more capital and for a cut in debt levels the driving force for the raising.
Fairfax is no different; it will cut debt from around $2.5 billion to $2 billion: which is still a big figure after the first stage of the raising (Source,COMSEC).
The raising was at 75c; the shares came on at 95c, up 10%, more in relief that the first stage of the funding had been so strongly supported by big shareholders.
"The Institutional Entitlement Offer received very strong support from Fairfax Media’s existing institutional shareholders, with 98% of domestic institutional shareholders and 90% of all institutional shareholders taking up entitlements.
"In addition, demand from existing Australian and international institutional shareholders in the bookbuild more than covered the entitlement shares not taken up.
"These shares were fully allocated to existing institutional shareholders on an equitable basis to those who applied for additional shares," Fairfax said in its statement to the ASX.
More than 21 million shares changed hands within the first 15 minutes. But the selling took its toll and the shares fell to 88c, down 5c from the closing level before the issue was announced late last week.
Fairfax said on Friday that it would issue up to 911.5 million new shares through a pro-rata entitlement offer at 75c a share, aiming to raise up to $684 million.
Ordinary shareholders will now be offered a top up on their existing holdings, but there are strong doubts that it will raise the $148 million.
We won’t know until April, but the slump in the shares and the reduction in the size of the dividend, will tell against the company’s ambitions.
The retail offer opens tomorrow.
The company expects to raise around $50 million from small holders.
Fairfax’s biggest shareholder, the John B. Fairfax family company Marinya Media, has committed to buy $12 million worth of stock. A $550 million raising would cut the family’s stake from 14.3% to 10.3%.
