Travis Perkins announced today it is launching a £300 million rights issue to help pay down its £985 million net debt.
The owner of Wickes stores said that although a drop in sales was ahead of its expectations, extra funding is needed to pay down debt and strengthen its balance sheet.
But group chief executive Geoff Cooper denied analysts’ speculation Travis Perkins is close to breaching the terms of its loan agreements.
He said: “While the group remains and expects to remain within its banking covenants, the rights issue will provide significant and additional financial headroom.”
The board has called an extraordinary general meeting for 17 May to get shareholder approval for the fully underwritten rights issue at a 51.6 per cent discount to last Friday’s closing price.
It will issue seven new shares for every 10 existing shares at a price of 365 pence per share.
A trading update revealed Travis Perkins’ merchanting division was the worst performing division in the business, with sales down 19 per cent in the last quarter.
Retail sales at Wickes were down just 3.6 per cent, as the chain launched its first ever television marketing campaign for kitchens and bathrooms.
Travis Perkins has been hit badly by exposure to the faltering housing industry, forcing it to reduce capital expenditure to £37 million from £126 million last year and cut 14 per cent of its staff.