St Modwen seeks £100m cash boost

DEVELOPER St Modwen is trying to raise £100 million to see it through the credit crunch.

The firm has been hit hard by the downturn in the commercial and residential property sector and it has had to renegotiate its banking arrangements.

Now it wants to issue 80 million new ordinary shares to bring in £102 million.

This will be used to reduce its debt and head off the need to sell land or buildings while the market is depressed.

It will also mean the regeneration specialist has cash to buy land and properties at what it hopes are rock bottom prices.

The move comes after St Modwen, which is behind some of the highest-profile developments in North Staffordshire, wrote a further £87 million off the value of its estates – down from £949 million on November 30 to £862 million at the end of April.

A spokesman for Birmingham-based St Modwen said: "This is by no means a rescue rights issue like a lot of other companies have done.

"The decision we have made to head off further valuation decreases is a very positive statement from us.

"It reduces our debt and increases our financial flexibility.

"It gives us more headroom to acquire more estates that are really good value in the current market. It puts us on the front foot."

If the proposals are approved at an extraordinary general meeting, the shares are expected to be on sale from June 9. Since the end of November, St Modwen has secured revenue of more than £90 million, either from sales of existing stock or from contracts to build new sites.

In North Staffordshire, it is building Vodafone's new Festival Park headquarters and it runs Trentham Gardens.

It is also behind major developments including Trentham Lakes.

Directors at the firm are cautiously optimistic there are signs of recovery in both the commercial property and residential land markets.

Bill Oliver, chief executive officer at St Modwen, said: "We have been very, very pleased with the amount of interest shown in the rights issue.

"That wouldn't be the case if investors didn't think there was a future in the company and they wouldn't put their money up if they didn't think it was going to be very profitable.

"I think people are now looking forward a bit more.

"They are looking towards the recovery and they are asking which companies are going to come out strongest."

Analysts believe shareholders will welcome the potential cash injection.

Richard Farmiloe, investment manager at Hanley stockbroker Brewin Dolphin, said: "They have written down their property values further from £949 million to £862 million in the five months from the end of November to the end of April.

"Therefore if conditions – and values – in the property market continue to deteriorate, they might have to consider sales of property at depressed prices into a difficult market.

"The raising of over £100 million cash from investors announced will give them more room for manoeuvre to withstand further falls in property values, and the ability to take advantage of attractive new opportunities and continue with their long-term development plans."

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