I write to you today with exciting news. An unexpected opportunity has arisen for us to extend our mutual relationship through a novel financing technique.
It’s known as befuddlement and it’s backed by some of the biggest names in the City Westminster – Deutsche Bank, UBS, RBS Hoare Govett, BNP Paribas, David Blaine, Rothschild and a host of other august institutions.
The gist of the plan is this: you torch 96 per cent of your existing stock and then we grant you the chance to replace most of these at about three times the current price. Or something similar.
Sounds too good to be true? Here’s the detail:
A capital reorganisation under which:
- each existing share (including those to be issued under the firm placing) will be subdivided and converted into one interim share of 1p nominal value (“Interim Share”) and one deferred share of 24p nominal value; and
- immediately thereafter, the Interim Shares will be consolidated on a one for 10 basis into new ordinary shares of 10p nominal value (“10p Ordinary Shares”).
A fully underwritten rights issue of 11 new 10p Ordinary Shares for every 5 10p Ordinary Shares at an issue price of 400p per share
I’m re obliged to tell you that the issue price is really the equivalent to 40p a share, but that’s looking backward rather than forward, which we are now sure you want to do. Myself and the rest of the board will have those share certificates back above a fiver in no time!
I should also mention that, separately, we are issuing 225m new shares of the kind you currently own. These are being sold at 120p apiece and will be split in the same way as yours, before holders are offered the same rights participation terms.
Unless we’ve got our maths wrong, this should bring in about £1bn after we’ve made some special payments to the people who made all this possible. (More on that later in the month.) But I can tell you that, accompanying a new €1bn lending facility, pro forma net debt/EBITDA will stand at 1.9x, with pro forma gearing at 36.1 per cent as of 31 January 2009.
Although there’s no dividend for the foreseeable, we are hoping to have attained an invstment grade credit rating by this time next year!
Fingers cross.
Best wishes
Chip
There’s some important small print here, but don’t worry too much about that. We know that you know that stock consolidations in such circumstances are an insult to investors’ intelligence.
Related links:
Wolseley reorganisation – statement
Wolseley turns to investors for £1bn cash call – FT.com
Wolseley rights issue presentation slide – FT Alphaville/Long Room