Kathmandu (KMD) seems to have struck a snag with Briscoe Group, the largest shareholder deciding not to participate in the outdoor wear retailer’s emergency $NZ207 ($A201 million) capital raising.
Kathmandu announced the issue yesterday in an effort to preserve its own balance sheet amid the coronavirus crisis. The announcement came with the final version of its interim results which showed a fall in earnings, as expected.
The New Zealand company will raise equity via a fully underwritten $NZ30 million institutional placement and a 1.2 shares for everyone held pro-rata accelerated non-renounceable entitlement offer to raise $NZ177 million.
The issue will be made at a deeply discounted 50 cents a share compared to the last sale Tuesday of 98 cents.
As expected the Christchurch-based Kathmandu confirmed a sharp fall in interim earnings of 41.7% to $NZ8.14 million.
That came on a 58.8% leap in revenue to $NZ363.7 million following the completion of the $A350 million purchase of surf brand Rip Curl, which contributed revenues of $NZ134 million to the first half result as well as $NZ17.5 million in earnings.
Briscoe CEO, Rod Duke told investors in New Zealand on Wednesday that while it supported Kathmandu, the company’s immediate priority was to “to ensure the strength of our own business both in the short-term and for the future”.
Briscoe owns 16.27% of Kathmandu (meaning it would have been required to put up around $NZ33 million to hold its stake in Kathmandu).
Briscoe has made it clear in the past week or so that it was hunkering down itself. Briscoe’s stake could very well fall sharply by not participating in the issue.
Briscoe has been forced to close its shops because they are not considered essential (Kathmandu is in a similar position) under the NZ government’s COVID-19 shutdown policy.
Briscoe last week abandoned its 12.5 NZ cents a share interim dividend because of the shutdown and the need to conserve its liquidity and cash.
“The board is taking pre-emptive action with the capital raising announced today, to ensure our Group remains strongly capitalised during the current market uncertainties,” Kathmandu CEO Xavier Simonet said in yesterday’s filings with the ASX and NZX.
Proceeds will be used to pay down $NZ86 million of debt and bolster the company’s balance sheet by $NZ115 million, thereby giving Kathmandu with total liquidity of $NZ315 million.
It’s the second time Kathmandu has gone to shareholders for funding in the last six months, with the retailer asking the market for $NZ145 million last October to fund the acquisition of Rip Curl.