Flight Centre and Southern Cross Media are believed to be assessing their options for an equity raising as their shares remain suspended after a dramatic slide in their market values due to the coronavirus crisis.
Southern Cross, which has seen its market value crash to $127m from $653m last month, is believed to be assessing all options with respect to embarking on a recapitalisation, including moves to tap the market or obtain more debt.
On Wednesday, it shares went from a trading halt into voluntary suspension. Its current net debt pile is $330.5m.
There is speculation mounting that Flight Centre will push forward with an equity raising, prompting some that had been sounded out for an equity raising of online travel website Webjet to keep their powder dry for that deal.
Flight Centre currently has a $1bn market value and $10m of net debt, and the thinking is that it would have stronger prospects of a government bailout than Webjet due to its sheer size and shopping centre presence, being seen more as an essential service.
In January, Flight Centre, which is thought to be close to Macquarie Capital, had a $4.5bn market value with a $44.40 share price versus its last traded price of $9.91 and $1bn market value.
Some believe that Webjet had been trying to raise about $250m — close to half its current market value — for a price around $2 per share.
Webjet’s shares last traded at $3.76 and it was scheduled to embark on a bookbuild on Wednesday to secure funds.
Another stock being closely watched as a possible equity raising candidate is Mayne Pharma, which has a $377.8m market value, down from $772.8m last month, and net debt of $290m, equating to 2.5 times its earnings. Its debt covenant is 3.5 times.
oOh!media still has not resumed trading after it appears efforts to tap the market on Monday for $167m at 53c per share through a bookbuild were unsuccessful.
However, offering some positive news to the markets on Wednesday, Cochlear successfully raised $880m through JPMorgan.
Initially, Cochlear planned to raise $800m via a fully underwritten institutional placement and $50m through a share purchase plan.
But it was later scaled up the raisig to $880m due to strong investor demand.
The medical device company is seen as a blue chip stock, and many would see it as an opportunity to secure shares cheaply, at $140 each, after its market value moved from $13bn to $9.72bn on the back of the crisis.
The raising was conducted at a 16.7 per cent discount to the stock’s last close of $168 as the coronavirus crisis is likely to see a number of elective surgeries called off.
It also needs to fund its costly legal patent infringement legal case that has played out over two years.
In 2018, the US District Court awarded $US268m in damages against the hearing device maker in the case.
At the time, the company said it would appeal the judgment in the case brought by the Alfred E. Mann Foundation for Scientific Research and Advanced Bionics, which was expected to take about two years.
This month, Cochlear announced that it had lost the appeal. The company announced it needed $US268m to fund the failed appeal of its patent infringements cash in the US and potentially another $US138m to fund other costs such as legal fees.
The successful raising by the $9.72bn company could pave the way for other raisings among major ASX-listed companies. Observers say a flight to quality is likely to play out when it comes to institutional investors supporting particular deals.
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