Online travel group Webjet wants $275 million in new capital to see it through the coronavirus crisis which has wiped out travel and tourism demand globally.
The raising consists of a $101 million underwritten institutional placement and a partially underwritten entitlement offer of between $174 million and $231 million.
Webjet said proceeds from the issues will be used to strengthen the balance sheet in light of the continuing impact of COVID-19 and government restrictions impacting travel globally
“Proceeds expected to be sufficient to provide for operating costs and capital expenditure through to the end of 2020, even assuming severe travel restrictions continue,” the company told the ASX.
The company said that it had already started cutting costs, with further cost reductions available if required.
The ongoing spread of COVID-19 globally and associated government restrictions has resulted in a material escalation in cancellation rates of near-term travel and a significant reduction of overall travel activity,” the company said.
Webjet is experiencing cancellations occurring at short notice prior to travel, which has reduced visibility on future earnings and cash flow and has led to a material decline in revenues.
“Webjet anticipates that any revenue contribution in the near-term will be nominal only, until the situation improves and travel activity resumes,” the company said in the statement to the ASX.
Webjet’s shares have been in a trading pause since March 19.
The company said redundancies will total 440 and the majority of remaining staff moving to 4 working days a week
The company plans to cut board and executive remuneration, with the CEO reducing his salary by 60% for the calendar year 2020 and receiving no bonus for 2019-20.
As well the $12.2 million interim dividend payment has been deferred and will be reviewed in October 2020 when the company would normally be paying a final.
That means the final is not on, even though there was no decision announced. The interim could very well be the only dividend for the year if it has the cash to do so.
“Proceeds from the capital raising will be used to strengthen Webjet’s balance sheet, with net debt reduced from $135 million to a net cash position of $140 million,” the company said.
“This provides Webjet with pro forma available liquidity of $470 million as at 29 February 2020 based on unaudited management accounts1including undrawn revolving credit facilities, which is expected to represent sufficient liquidity to the end of 2020, even assuming severe travel restrictions continue.
The offer price will be $1.70 a share a hefty 55% discount to the last sale price before trading was suspended last month of $3.76. It also threatens a significant dilution of existing shareholders’ stakes, especially if they don’t take up the shares.
That’s a sure sign of the desperate need Webjet has for the capital, as does Kathmandu, anther struggling group that put its hands out for shareholder support with a deeply discounted (50%) offer of its own.