Orbis jumps at $59m bank-backed Valad raisingBridget Carter |...

Orbis jumps at $59m bank-backed Valad raising


Bridget Carter | September 24, 2009
Article from: The Australian

VALAD Property Group, which limped to the end of the financial year with a $1.49 billion loss, has managed to secure up to $59.5 million in a capital raising backed by Goldman Sachs JBWere.

Among the investors pouring money into the business is the Simon Marais-backed fund manager Orbis, which holds a stake of about 9 per cent in Valad.

Valad Property Group yesterday announced it was issuing new equity at 10c per security, a 37.5 per cent discount to the 16c that the securities last traded at before being placed in a trading halt.

The group said $56.5m of the money from its fully underwritten equity raising would be used to settle a deferred payment of pound stg. 29.5m ($55.2m) owed as part of its 2007 Scarborough acquisition.

That would mean scrapping an earlier agreement over the deferred payment for the Kevin McCabe-backed company announced on August 27. As part of that earlier deal, Valad was to have handed over equity to Scarborough at a cost of 10c per security, instead of handing over most of the cash owed for a deferred payment included in the terms of the 2007 acquisition.

That would have taken Scarborough's stake in Valad to 19.9per cent.

If security holders did not approve that proposal, the alternative for Valad was to convert the money owed into unsecured loan notes to be paid by September 30, 2012, at a cost of 9.5-15 per cent interest a year.

The equity raising comprises a one-for-four accelerated non-renounceable entitlement offer to raise $40.2m, a $16.8m institutional component, a retail component of about $23.4m and an institutional placement of about $19.3m, 12 per cent of which is pre-issued capital.

A Valad spokeswoman said the company's managing director, Peter Hurley, would not comment on the raising. But in a statement he said existing investors had indicated they would be prepared to support a raising to help pay for Scarborough liability.

Mr McCabe could participate in the retail component of the raising.

Valad said it had so far sold $571m worth of assets, with proceeds used to pay down debt, and the raising would leave gearing almost unchanged at 43.3 per cent. The only debt expiry in the next year was a loan of $29m.

Valad, whose security price crashed from 2007 highs of more than $2 to about 3c earlier this year, made an ambitious $2bn acquisition of the London-based property funds management company Scarborough almost two years ago, which took its funds under management from $6.6bn to $17bn.

This year, the group tipped most of its European assets into a joint venture with the Bank of Scotland before announcing its 2009 financial year loss of $1.49bn and providing no earnings guidance or assurance of a future distribution payment.

An analyst, who did not want to be named, many investors were interested in supporting recapitalised vehicles in the hope that they could revert close to their net tangible asset backing.

Despite that, the analyst said, the latest raising was not enough to get Valad out of trouble.

"They have harder issues," the analyst said. "It is going to be a long, slow grind for some of these small guys working through debt and refinancings," he said, referring to some of the smaller listed property trusts.

Orbis chief executive Simon Marais said yesterday Valad had a lot of challenges, but was pressing through the worst.

"The share price is so low, even if you believe a third of it (the company) would be OK, you would do fine. I think the chance of losing is very low."