Infratil plans to raise $300m in fresh equity capital at small discount to invest more in data centres, 5G rollouts and windmills
Capital raise #15: Infratil is the latest listed company to announce it will raise $300 million of new equity as part of its plans to build a ‘war chest’ to take advantage of opportunities likely to arise during the recession. The diversified infrastructure investment business will sell $250 million of new shares to institutional investors and a further $50 million to existing investors via a share purchase plan at $4.76 a share – an 8 percent discount to Monday’s closing price of $5.17.
The additional capital will give Infratil $514 million of funding to further develop its CDC data centre business, the roll-out of new 5G mobile networks at Vodafone New Zealand, and renewable energy projects through its investments in Tilt Renewables and Longroad Energy. The company says it will continue to focus on infrastructure development which it believes will be key to New Zealand’s economic recovery. The share purchase for retail investors will open on June 12 and close on June 25.
Another retailer pulls back: Womens fashion retailer Max is to close 17 of its 40 stores. The privately owned clothing chain is restructuring its operations and seeking a creditor’s compromise to allow it to keep trading, including obtaining significant discounts in its rent bill. It is understood the company has not paid any rent since the end of March.
Downsizing: Despite receiving $1.6 million in government wage subsidies, Max said it had incurred “considerable losses” due to costs that could not be avoided during the lockdown. The company plans to terminate 17 leases in Auckland and Christchurch by the end of next month and will seek to renegotiate the remaining leases directly with landlords. Max said its shareholders don’t have the funds to sustain the business in its current form and complete the transformation it had embarked on since it was purchased from private equity two years ago. The company employs 214 staff.
Fed tightrope: The U.S. Federal Reserve faces a delicate balancing act when it meets this week following last weeks better than expected employment data for May. The Fed will also release its first economic forecasts in six months at this week’s meeting. The Fed’s macroeconomic projections — which it declined to publish in March because the situation was so uncertain — come after the latest jobs report showed a surprising uptick in new hiring after two months of deep job losses, and in the middle of sharp rebound in stock prices.
Many economists are expecting Fed officials to signal that output will shrink by a wide margin this year, with interest rates like to remain at zero for at least the next 2-3 years which would further reinforce their dovish stance and determination to keep monetary policy very loose. However, any hesitation in terms of their willingness to support the economy could disrupt markets, which have seen equities rally and yields on government debt rise.
Whatever it takes: Since March, the Fed has slashed interest rates, dramatically expanded its balance sheet through asset purchases, and set up a series of facilities to lend to struggling entities across the US economy. But a debate has been unfolding within the US central bank about its next steps, including whether it should be more precise and aggressive in its guidance on interest rates — tying any tightening of policy to specific milestones in the recovery — or set specific benchmarks for asset purchases.
Cathay bailout: The Hong Kong government has agreed to lead a US$5 billion (NZ$7.5 billion) bailout of Cathay Pacific, taking a minority stake in the troubled carrier. Cathay and parent company Swire Pacific announced plans to raise the new capital yesterday to help the airline survive the crisis wrought by the coronavirus pandemic.
Double whammy: Hong Kong’s flagship carrier had already been suffering a slump in business because of widespread protests that rocked the city last year when the coronavirus pandemic hit. Cathay said that passenger revenue has collapsed to around one percent of normal levels. As a result, it had cut executive pay, furloughed staff and has been operating at just one percent of its normal capacity to preserve cash. It said it did not expect to return to the same number of flights it was operating before the pandemic any time soon.