British housebuilders Barratt and Redrow turned to investors for fresh funds on Wednesday, hoping to repair weak balance sheets and have some money left over to exploit subdued property prices by snapping up land.
Launching steeply discounted rights issues, both companies stressed they needed to reduce debt and bolster their financial positions after suffering big losses as a result of writedowns on the value of their landbanks.
That contrasted with Britain's biggest shopping mall owner, Liberty International, which also announced it would issue new shares but said the money would be used to develop existing sites and fund acquisitions.
After a flood of emergency rights issues from firms hammered by the global financial crisis, bankers expect the trend will now shift towards companies able to use any funds raised to expand aggressively and deliver high returns.
Barratt, which also reported a full-year loss of well over half a billion pounds on Wednesday, said it would raise 545.5 million pounds ($891 million) via a 1.3 for 1 rights issue.
The issue was priced at 100 pence per new share — 63 percent below Tuesday's closing price of 268.5 pence and at a 37.8 percent discount to the theoretical ex-rights price.
The company said it would place a further 72.9 million new shares with investors at 240 pence, raising an additional 175 million pounds.
"It is now an appropriate time to substantially strengthen the company's balance sheet and reduce its debt levels," Barratt chief executive Mark Clare said in a statement.
"This will also enable the group to develop a number of its existing sites and to take advantage of land purchasing opportunities as they arise," Clare added.
Analysts at Panmure Gordon welcomed the move but said they preferred housebuilders with relatively low debt levels that had managed their way through the financial crisis without significantly writing down the value of their land banks.
"Whilst a rights issue will definitely put the group on a more stable footing and give Barratt the confidence to go out and purchase land, at this stage we would continue to prefer Bovis and Bellway and companies with cash-positive balance sheets and better financial health."
Shares in Barratt were up 1.8 percent at 273.2 pence but 0859 GMT, above levels of around 40 pence struck last summer but still worth less than a quarter of what they were in early 2007.
CUTTING DEBT
Clare told journalists during a conference call that Barratt would use funds raised to help reduce its term debt from 1.5 billion pounds to 900 million pounds and that it had earmarked about 200 million pounds to spend on acquiring land.
"What we are keen to do is make sure that we maintain a landbank that's at least 3.5 years long over the next few years," Clare said.
Barratt said it made a pretax loss of 678.9 million pounds versus a 137.3 million pound profit a year earlier after writing down the value of its development land by 499.5 million pounds.
Meanwhile smaller rival Redrow said it would use a 13 for 14 shares rights issue to raise 156 million pounds, saying it would buy five freehold land assets as part of a 15 million pound deal but that it had also agreed to reduce its debt facilities to 250 million pounds from 425 million.
"The proposed rights issue will strengthen Redrow's balance sheet and position Redrow for growth," Redrow Chairman Steve Morgan said. "We now need to enhance our ability to acquire land through selected acquisitions."
It will issue 148.6 million shares at a price of 105 pence each which is 55 percent below Tuesday's closing price of 233.5 pence and a 38.8 percent discount to the theoretical ex-rights price.
Shares in Redrow were up 3.5 percent at 241.7 pence by 0903 GMT but still a long way short of levels above 700 pence struck in early 2007.
Shares in Liberty International sank 7.8 percent after it said it would place 9.9 percent of its issued share capital to kickstart investment plans it mothballed at the height of the financial crisis a year ago.
Pricing on the placing of 56.1 million shares is expected by 1530 GMT.
