Shares in insulation maker Superglass collapsed as the Stirling-based firm unveiled plans for a last-ditch re-financing to stave off administration.
The company, which employs about 170 at its factory in the city, said it had lined up enough subscribers for a £12.2 million share issue and has also reached agreement with lender Clydesdale Bank to convert some of its debt into equity.
News of the firm’s second refinancing in as many years came as it reported a pre-tax loss of £2.9m in the six months to the end of February, as sales shrank by a fifth in the face of the on-going construction slump.
It warned that if the refinancing does not proceed it is likely the firm will enter some sort of insolvency procedure, wiping the remaining value of its shares. The stock closed down 63 per cent at 2.12p.
Speaking to The Scotsman, chief executive Alex McLeod was unable to say how the proposed equity issues would affect existing shareholders, stressing that the level of dilution depends on how much is eventually raised.
He said: “This is good news. What this will do is provide significant headroom, transforming the business from being in debt to a net cash positive position.”
The equity issue is being conducted by N+1 Singer at an expected issue price of 2p per share. An update on the refinancing is expected within weeks.
Superglass had already warned that it would be unable to meet scheduled debt repayments of £8.2m over the next three years, despite good progress on its cost-saving plans including a factory revamp paid for from a £9.5m fundraising in November 2011. That refinancing, which also included a £2m grant from the Scottish Government and the conversion of £12.15m of debt into shares, had been intended to draw a line under difficulties which had reduced Superglass’s market value from more than £120m at flotation in 2007 to less than £2m, as it suffered from the dramatic slowdown in housebuilding following the financial crisis and a government scheme encouraging home insulation failed to provide a sales boost.
The plan unveiled yesterday will see Clydesdale convert a further £6.5m of debt into shares, worth about 10 per cent of the company. A further £3m of debt will be paid off from the proceeds of the placing.
The remaining £2.5m of debt will not be due for repayment until 2018, but the bank will have the right to half of Superglass’ profits after August 2014.
The latest shake up will also see the group swap its main market listing for the junior Aim to save costs.
In its interim results, Superglass said trading conditions are “extremely challenging” for a number of reasons. The recent transition from one government scheme to another has caused a major gap in activity for fitting loft and cavity insulation, while housebuilding activity remains “abnormally low”.
McLeod added that the move to an upgraded factory had disrupted production during the period, but the move will produce about £3m in savings from next year.
Further measures, such as improved compacting of the insulation material for transit, will eventually take annual savings to £5m.
McLeod said government measures should ensure housebuilding starts
to recover, but the savings mean the firm would be profitable at an operating level even under current trading conditions.