Will Retail Shareholders Back RCR’s Recapitalisation?

By Glenn Dyer | More Articles by Glenn Dyer

Now for the big test for RCR Tomlinson’s survival attempt – big shareholders have ponied up $70 million, which is enough to keep it alive, but retail shareholders are going to be asked to contribute another $30 million to the $100 million issue at $1 a share.

The shares are being offered on a one-for-1.65 basis.

Existing institutional shareholders took up 88% of new shares available to them in last week’s offering and the shortfall bookbuild was oversubscribed. That suggests that any shortfall from the retail issue will be easily placed.

The deeply discounted equity raising (the previous close before the issue was $2.80) in the wake of a solar power project blowout on Queensland that saw the CEO depart and the stock remain suspended for most of August while the board and interim management worked out the mess and the cost of fixing it.

The company wrote down $57 million from its Daydream and Hayman solar farms contract in Queensland following an internal investigation into cost overruns which saw managing director Paul Dalgleish depart.

“While the board and senior management team takes the circumstances surrounding the need for the equity raising extremely seriously, we are delighted that RCR’s existing shareholder base have undertaken to continue supporting the business,” interim chief executive Bruce James said.

RCR’s shares plunged by more than 50% when it resumed trading after a month-long suspension, but above the share offer price of $1. They traded down 6.2% to $1.05 at the close yesterday.

RCR has also secured a $25 million increase in working capital facilities, with a corresponding reduction in its in its bank guarantee facility.

Chairman Roderick Brown has said RCR will alter its strategy to having a more acceptable risk profile. This includes being more selective in the renewable energy sector and shifting towards “alliance-style” contracts.

The company needed to show its banks that shareholders would contribute a minimum of $50 million to the issue otherwise they might have called their loans and put the company into administration.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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