Countrywide yesterday afternoon announced that the bookbuilding process for its new shares has closed.
Bookbuilding is the process by which investor demand is gauged, and at what likely price.
Countrywide is raising £140m by creating 1,114,419,569 ‘firm placing shares’ at a discounted price, representing an 80% discount on the 50p at which shares closed on August 1.
In addition, the bookrunners have placed 285,580,431 ‘open offer’ shares. Qualifying shareholders will be given the opportunity to apply for these.
Oaktree Capital Management, currently with a 30% stake in Countrywide, will indirectly hold at least 18.9% of the enlarged share capital.
This is after a commitment from subsidiary OCM Luxembourg EPG 113 Castle Holdings S.à r.l that it will pay £24m cash for 240,000,000 new shares.
Brandes Investment Partners has also committed to buy 228,480,000 new shares for £22.8m. It will have a stake of at least 16.2% in the newly enlarged share capital of Countrywide.
Countrywide executive chairman Peter Long is also to buy new shares, for up to £336,158.
He will hold some 0.2%.
Countrywide plans to use the proceeds of its fund-raise to reduce its £211m debt mountain by 60%.
A general meeting of shareholders on August 28 will almost certainly simply rubber-stamp the fund-raise. However if it does not, then Countrywide will enter into a consultation with its lenders to renegotiate its credit facilities, the results of which could be uncertain, according to accountants PricewaterhouseCoopers in a note to yesterday’s statement.
It says that the lenders could demand repayment, which would “likely result” in insolvency and Countrywide ceasing trading.
The recovery plan includes going back to basics in sales and lettings to regain market share, plus:
- Getting staffing levels and capability right in sales and lettings– yesterday, new group managing director Paul Creffield told EYE that the business is now broadly fully staffed, with 5,500 people working in 850 branches.
- Decentralising decision making and empoweringlocal directors and branch managers.
- Restoring discipline in its fees strategy.
- Restoring the lettings business.
Countrywide says that these actions could add £10m-£15m of EBITDA.
Yesterday, after Countrywide announced its half-year results plus details of its fund-raise to support the three-year recovery plan, its shares went into freefall.
They finished the day some 62% down at 18.5p, but did go as low as 10p. The fall wiped over £164m off Countrywide’s market value – more than it is attempting to raise.
Long told EYE that the fall had been entirely expected.
However, analyst Russ Mould of AJ Bell warned that the combination of Countrywide’s high fixed costs and heavy debt load should be ringing alarm bells for investors.
Lest we forget. This isn’t the first fund raising. There was also one at £1.75 a while back,
See http://www.propertyindustryeye.com/trio-at-top-of-countrywide-buy-thousands-of-shares-to-demonstrate-their-commitment/
See the comment from Hillofwad71
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The bigger they are the harder they fall!
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Great recovery plan… get good staff, get capable staff, get good fees, get good at listing houses for sale and rent.
**** me, I need to remember this if we struggle ever.
This chaps paid how much to come up with that plan.
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You couldn’t make it up could you! They lost great leaders who could have turned it round and none of them are coming back. They are left with weaker MDs and bringing back MDs that failed elsewhere. The plan is to do more listings and get good fees through getting better staff – what?
It’s a farce on any level. Why isn’t that the foundation to build a plan from not a plan in itself. It needs very strong leadership and inspiration from a determined team focused on the core sales, lettings and FS disciplines. All MDs must run one of either sales or lettings, they cannot run both as they’re not skillful enough to do so.
Best of luck to them, hopefully they can turn it around but they need a stronger more in depth plan than they appear to have.
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I heard its already starting to bite the front line with the scale back of company cars to new recruits.
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