Countrywide shares yesterday recovered some of its earlier losses, but remained in negative territory after the property firm announced plans to raise £165m, while removing key members of its board including the chairman and CEO.
The group’s shares sank after announcing that it needs to restructure its existing debt in order to reduce its debt burden and exposure to creditors.
At one point yesterday morning, Countrywide’s share price was down 15.9% at 155p, having dropped from Wednesday’s closing price of 184.4p, but it did recoup some of its earlier losses to end the day at 165p, down 10.5%.
Countrywide revealed that it will raise £90m of the funds via a private share placement of 10.3 million shares to Alchemy, a private equity fund and shareholder, while also seeking a new £75m loan from its existing lenders to be repaid over four years.
A significant portion of the new funds will be used by Countrywide to clear existing loans worth in the region of £91.9m.
Part of the conditions for the new financing is that Paul Creffield, the group’s current managing director will retire and Peter Long, its executive chairman, will step down from the role.
Carl Leaver, former head of digital at Marks & Spencer, has been confirmed as Countrywide’s new chairman, while we wait to see who the new CEO will be.
However, the proposed transaction with Alchemy has been opposed by Catalist Partners, a significant shareholder in the company.
A statement from Catalist Partners said: “Catalist Partners notes Countrywide’s announcement. As one of the company’s largest shareholders, Catalist strongly opposes this unnecessary, ill-judged and dilutive transaction which, while clearly a very attractive deal for Alchemy, is destructive for shareholders and only serves to fund the continuation of a flawed “back to basics” business plan.”
The announcements by Countrywide, which were contained within firm’s half-year earnings results, showed that the group’s revenues fell to £173.8m this year as compared to the £241.6m recorded in H1 2019.
A range of cost-cutting measures and financial support from the government helped the group record a £14.9m profit.
Countrywide’s existing position was not helped by the collapse of its planned sale of consultancy Lambert Smith Hampton to a Danish businessman earlier this year.
The company was left looking for a new buyer for its commercial property business after the investor who agreed to pay £38m failed to come up with the cash.