The number of companies asking shareholders for money has jumped in the last few days, highlighting the diverging fortunes of UK companies. While some are turning to shareholders for cash to tackle unwieldy levels of debt, stronger businesses are looking for funding to snap up heavily discounted assets and fund growth plans.
Property group Workspace was first in line, that it is looking to raise £87.2m, before costs, through a five-for-one rights issue at 10p a share. The Reit – which provides office space to small business – said it runs a "material risk" of a covenant breach after the value of its properties slumped by 25.5 per cent in the last nine months of 2008. Its bankers – which include RBS and GE - have agreed to extend covenants if £50m of short term debt is paid down, although Workspace will need to pay huge fees for the privilege.
Engineering group Cookson has also confirmed that it will ask shareholders for cash in what analyst Harry Philips at Evolution Securities describes as an "eyewatering" twelve-for-one deal. The company is looking for £240m to ensure that it doesn’t breach its 2009 net debt to EBITDA covenant of three times. Cookson’s net borrowings currently stand at approximately £732m.