Fairfax Considering $150m Share Issue
Sydney Morning Herald
Wednesday October 24, 2001
Rather than take its chances on the debt market, John Fairfax Holdings is looking at issuing convertible preference shares to replace a $150 million loan, in a move fund managers have branded ``conservative".
On Monday the newspaper publisher revealed it was considering the issue as part of its capital management program.
Fairfax, publisher of The Sydney Morning Herald, is seeking $150 million to $200 million.
In a briefing to fund managers yesterday, the company said it would use the money raised to replace a $150 million loan that falls due at the end of March next year.
Rather than wait until the new year to refinance, when the debt market could be less favourable, Fairfax is considering raising money now. The issue would have a 6.5 per cent interest rate fully franked.
Chief financial officer Mark Bayliss is meeting institutions this week to assess interest in the raising and the company will decide whether to proceed early next month.
Fund managers said the company was being conservative in terms of managing its credit rating risk and flexibility.
Fairfax was carrying $765 million debt at the end of June.
Although the company is seeking a relatively small amount, analysts criticised the proposed issue for diluting the holdings of existing investors.
``They appear to be paying a small premium to secure certainty, but in the process managing to dilute ordinary shareholders," said Rothschild funds manager Scott Maddock.
In a statement to the Australian Stock Exchange, Fairfax said: ``By further reducing debt, diversifying its equity base and increasing funding flexibility, Fairfax will ensure it is well placed to take advantage of future growth opportunities."
Mr Bayliss told fund managers he was ``comfortable" with analysts' 2002 net profit forecasts of $90 million to $100 million. Fairfax booked a profit of $128 million last year.
He also confirmed the advertising market was still ``tracking along the bottom". Employment classifieds remained the main weakness, while display advertising was patchy.
Shareholders are waiting for the annual general meeting on November 7 for an update on trading conditions.
Fairfax fell 1c to $3.30.
© 2001 Sydney Morning Herald