The likelihood of Fisher & Paykel Appliances securing a cornerstone investor to strengthen its balance sheet increases every day that the company holds off revealing its capital-raising plans, says broker Goldman Sachs JBWere.
Holding back on any equity- raising announcement would allow time for potential trade players to do due diligence on Auckland- based Appliances, said Goldman analyst Adrian Allbon.
The unveiling of a cornerstone investor would mean a smaller capital-raising pre-issue discount and it would be an external enforcement of the company's underlying value.
According to Mr Allbon's report, a cornerstone investor topped up with a rights issue is the most likely outcome for the whiteware manufacturer.
That will generate up to $150 million.
"We surmise the longer Appliances takes to come to market with its capital-raising proposal the more likely it is pursuing a cornerstone, who could currently be undertaking due diligence."
Appliances said last month that it was considering tapping investors for equity capital after revealing debts had ballooned to $520m as the kiwi dollar weakened and demand for its products fell.
Early this month, the besieged manufacturer, whose share price had tumbled nearly 70 per cent before this week's rally, secured a funding lifeline in the form of an $80m loan from its banking syndicate.
Only last week, resin maker Nuplex was forced to offer a deep discount (market price less 79 per cent) and increase the scope of its rights offer to win over shareholders, in a balance sheet strengthening exercise that many analysts believed would set the benchmark for other struggling companies.
But by taking the cornerstone- rights issue option, as opposed to a full rights issue, Appliances would get a more favourable pricing than Nuplex, Mr Allbon said.
A stumbling block for potential strategic partners, however, could be the company's non-core consumer finance business, and whether a 15 to 20 per cent stake in Appliances would be enough to justify the effort, he said.
Likely partners would be the United States' Whirlpool, Turkey's Arcelik and China's Haier, although the last two could harbour concerns about Appliances' technology-sharing agreement and motor contract with Whirlpool.
Appliances' head of investor relations, Paul Brockett, said the company had "nothing to announce".
Meanwhile, closure of the company's Cleveland factory in Brisbane was going ahead next Tuesday as planned.
A shortlist of potential buyers had been lined up, he said, and offers were closing in on the figure the board had in mind.
http://www.nzx.com/news/markets/4885080
FPA Price at posting:
30.9¢ Sentiment: Buy Disclosure: Held
