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RCR Tomlinson readies a recap to rip off the Band-Aid
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Street Talk. Darren England
Troubled contractor RCR Tomlinson is asking investors to back a proposed recapitalisation plan designed to overcome big losses on a problematic contract and shore up the company's future.
Street Talk understands RCR is seeking support for a $100 million-odd equity raising at a big discount to its last close, to ensure it is financially viable and can afford to keep bidding for new projects.
It is understood RCR interim CEO Bruce James and his team kicked off their pitch to fund managers in Sydney on Friday, and has a full book of investor meetings lined up for early this week.
The company and
its broker Macquarie Capital is seeking early backing for the raising, before it can be underwritten and announced to the market. It is understood RCR wants to have an underwritten deal by the end of this week.
Sources said there was not a lot of good news in its pitch to investors.
After a review by the board and management team, fundies were told that l
osses on a troublesome solar farm construction project - the one that has had its shares suspended from trading since July 30 - will blow a hole in RCR's earnings and leave its balance sheet in urgent need of repair.
It's said to be the sort of news that no one is happy with; the board, management or investors. It's likely to cause RCR shares to tank in the short term, and cast doubt about its future in the absence of a chunky equity raising.
Perhaps the good news, though, is the losses are said to have been "narrowed" to the one contract. Investors were told the rest of RCR's business was performing either as planned, or close enough to it that there shouldn't be any contagion.
The fix is the recapitalisation currently being put to RCR's big institutional investors.
The company is proposing to rip off the bandaid with a significant offer of new shares to existing investors, in a deal designed to leave no lingering questions about the company's financial viability.
The question for fund managers is at what price they're willing to tip into the deal.
Some fundies are tipping a deal at or below $1 a share, which would be a 64 per cent discount to the last close of $2.80. The company seems more hopeful of something higher; a deal at $1.50 would be a 46 per cent discount.
Either way, it's hard to see RCR Tomlinson resume trading with a $463 million market capitalisation, even with a whole lot more shares on issue.
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