Second Victorian lockdown could prompt more equity raisings

The second wave of the coronavirus in Victoria has caught most by surprise. Picture: Tait Schmaal

The new lockdown in Victoria could force companies to return to the market for a second equity raising, according to market participants.

Candidates include travel and media companies, such as Webjet, Flight Centre, Southern Cross Media, oOh!media and Qantas, and Chadstone and Chatswood Chase shopping centre owner Vicinity Centres.

Vicinity raised $1.4bn last month, and if the latest trading restrictions weigh on its bottom line, it may choose to secure more funds to ensure its debt levels remain in check.

The situation could also force companies that had held off on raisings, such as Sydney Airport Holdings, Air New Zealand, AMA and the Westfield shopping centre landlord Scentre, to go to its investors for more financial help.

The second wave of the coronavirus in Victoria has caught most by surprise.

It is expected to further harm many companies that were fighting to survive and hoping for an uptick in economic activity to make up for the earlier trading restrictions.

As well as tourism, retail and media companies, it will also hurt entertainment and hospitality businesses, such as cinema chain companies like Village Roadshow and Event Hospitality and Entertainment.

While second raisings for some challenged firms are expected, the question is when they choose to tap the market.

Some believe that another cash call may come during or after delivering annual results between August and October, while others say that companies could choose to get on the front foot and go cap in hand to investors in the coming days, despite being in a blackout period ahead of the delivery of their earnings.

One saving grace for businesses is that lenders are said to be lenient towards their corporate clients when it comes to waiving debt covenant breaches.

In April, Webjet raised $346m and Flight Centre $562m in the midst of the pandemic.

A month earlier, oOh!media raised $167m.

Qantas last month secured $1.9bn in a capital raise.

No doubt, companies that need more equity will be hoping that rules from the Australian Securities & Investments Commission that have temporarily allowed placements for equity raisings to be up to 25 per cent compared to 15 per cent typically will be extended from beyond this month.