Surge brings new wave of rights issues

By Daily Mail Reporter
Updated: 02:55 EDT, 11 May 2009

Stock market investors are to be asked to stump up more than £1bn in new funds as a string of companies launch rights issues to take advantage of the recent surge in share prices.

Boom: More rights issues are expected to occur as the stock market continues to rise

Builders merchant Travis Perkins and mining group Lonmin are expected this week to ask for hundreds of millions of pounds. And department store chain Debenhams and housebuilder Redrow are both thought to be hammering out the details of share sales to bolster their finances.

The moves come hard on the heels of rights issues last week by 3i, raising more than £700m, and housebuilder Taylor Wimpey, which is asking shareholders for £500m.

Currys and PC World group DSG, banking giant HSBC, and bookmaker William Hill have all launched share sales since the turn of the year.

The new torrent of rights issues come after a spectacular rise in the

stock market over the past two months. The FTSE All-share index has leapt 28% since hitting a low in early March.

Travis Perkins is expected to announce its cash call, raising around £300m, as early as today.

It is likely to come in the form of a rights issue and share placing at a hefty discount to the 753p price at which the stock was changing hands at the end of last week. Travis Perkins, whose business includes the Wickes DIY chain, has been under intense pressure to trim its debts.

But only now has a share issue become worthwhile. As recently as late February, shares in the company were trading below 300p.

Platinum miner Lonmin is thought to be planning to sell new shares worth up to £320m. Since hitting a low in December, Lonmin shares have more than trebled in value.

The shares are likely to be sold at a discount to the 1622p at which they closed on Friday night. A number of other companies are known to be looking at ways of raising funds.

Rob Templeman, chief executive of Debenhams, has for months been talking about the need for the company 'to take debt off the agenda'. The company's borrowings are nearly £1bn. Fears that the company might not survive drove its stock market value down to less than £200m before Christmas. But news of strong trading and a revival in retail sector shares mean that Debenhams stock has more than quadrupled.

A rights issue to raise up to £500m is now on the cards.

Steve Morgan, founder of housebuilder Redrow who returned to the company earlier this year, is also thought of be weighing up the idea of a share sale to strengthen the company's balance sheet.