Ocado shares gain more than 20 percent in the morning
The shares of online retailer Ocado Group have gained more than 20 percent, following the company's announcement regarding an extension to its £100m debt facility and share placing.
As at 9:33 am, the shares are trading at 73.40 pence, up 21.22 percent.
Earlier, the company said it agreed with lenders, Barclays, HSBC and Lloyds, to extend the maturity of its £100m capital expenditure facility for a further 18 months to 6 July, 2015. The extended facility comprises a capex term facility of £90m and a revolving credit facility of £10m.
As on 28 October, the company had a net debt of £93.4m, while cash balance and drawings on its existing capital expenditure facility totalled £56m and £85.3m, respectively.
Ocado added that it will raise about £35.8m through placing about 55.88 million shares at 64 pence per share, representing a premium of 5.7 percent to the closing middle-market price on 16 November. The shares, which represent about 9.99 percent of the company's existing shares, will be placed with the existing institutional shareholders of the company.
Goldman Sachs International and Numis Securities act as joint bookrunners in the share placing. The shares are expected to start trading on the London Stock Exchange on or before 26 November.
"We have undertaken this placing and early extension of our existing facilities to ensure that Ocado has the continuing resources to focus on delivering growth through increasing the range and enhancing our customers' shopping experience. It also gives us greater flexibility to invest in various marketing initiatives around the opening of CFC2 and significantly expand our non-food offering," said CFO Duncan Tatton-Brown.
The company has completed construction of CFC2, its second distribution centre, in Dordon, with equipment installation almost complete, and testing under way since May 2012.
The new fund-raising follows market analysts' warning that the company is at risk of breaching its debt covenants.
"Standing alone against the largest retailers in the country with a pile of debt and falling market share isn't sustainable ... we believe that Ocado's days as a public company are limited," The Guardian quoted Panmure Gordon analyst Philip Dorgan as saying.
Ocado also said its sales growth had accelerated as the quarter progressed, with gross sales rising 11 percent over the 14 weeks to 11 November and rising 13.7 percent in the final six weeks of the period.
This article is copyrighted by IBTimes.co.uk, the business news leader