Auckland-based property investor and developer Augusta Capital is raising $45 million through a share offer to strengthen its finances as it faces a hefty loss as the Covid-19 pandemic has disrupted the property scene.
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The company said it will use the proceeds to pay down debt, shore up its balance sheet, and maintain its property assets and development opportunities until the market improves.
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Augusta will sell $12.4m worth of shares at 55 cents each to various institutional investors, with existing shareholders being offered one new share for 1.9 currently held at the same price.
Augusta shares last traded at 80 cents before the company was put into a trading halt ahead of the capital raising.
The Australia property firm Centuria, which recently pulled out of a full takeover offer for Augusta at $2 a share, will buy a 15.6 percent stake and has committed to going up to 24.9 percent.
Augusta's chair Paul Duffy said the offer would give the company financial flexibility for the present and future, after several planned capital raising plans did not occur before the Covid-19 pandemic hit.
"Augusta will be able to maximise outcomes from the assets on its balance sheet and is ready to access new opportunities as they become available in a post Covid-19 recovery.
"While we intend this to be sooner rather than later, the equity raise provides Augusta with a great deal of flexibility regarding the timing of future offering activity, whilst Augusta continues to manage the existing portfolio over this uncertain period," he said.
Augusta owns, office, commercial, retail, and industrial properties, as well as property investment funds, with a total value of $1.83 billion.
Duffy said the company had taken a range of steps to cut costs, including pay cuts and short work weeks, deferral of spending, cancellation of dividend, as well as applying for the government wage subsidy.
Its bankers had given it breathing space by relaxing conditions on current loans.
After the capital raising, the company would have a positive cash flow of $11m.
However, it expects an annual loss of $27m, largely from a drop in the value of assets, and the loss of a $4.5m deposit on an Auckland development.
It has mothballed a hotel development in Queenstown until the sector improves, while another hotel project in Auckland will resume shortly.