Three more join corporate rush for cash

Published on Wednesday 14 May 2008 21:44

THREE leading British companies unveiled plans to tap the stock market for more than £750 million yesterday.

The new calls for additional finance signalled an acceleration of the corporate rush to bolster balance sheets amid economic uncertainty.

In the space of just a few hours yesterday:

&#149 Mortgage bank Bradford & Bingley called on shareholders for 300m

&#149 FirstGroup, Britain's biggest bus group and owner of ScotRail, announced a placing of shares with institutional investors to raise between 230m and 240m

&#149 Regional newspaper group Johnston Press said it was raising 212m in new equity through a rights issue and subscription

The latest cash calls on shareholders follow Royal Bank of Scotland's controversial 12 billion rights issue last month – the biggest in British corporate history.

A week after that banking peer HBOS asked shareholders for 4bn.

Last night there was continued speculation in the City that other big institutions would have to follow suit. One fund manager said: "The sectors that are undergoing tough times are easy to see and companies from these sectors are therefore most likely to be next in line.

"Banking clearly. But obviously housebuilders are also under the cosh at the moment. They are being hit both by falling house prices and by people finding it more difficult to get mortgages in the wake of the credit crunch."

The fund manager said that there had been a rumour Barratts the housebuilder would announce a rights yesterday but the company had not made the move.

Paul Mumford, senior fund manager at Cavendish Asset Management, said: "It (B&B] seems to confirm a worrying trend emerging from the UK banks, of heavily discounted bids for cash.

"The market is a-buzzing with 'who next?', and Alliance & Leicester and Barclays can expect to be watched like hawks in the coming days."

Analysts said the fact that FirstGroup and Johnston Press were launching rights issues showed it was not just the banks who needed money.

One said: "FirstGroup is a very cash-generative transport group, but it looks like it too is finding it difficult to get funding in the current climate.

"Apart from the housebuilders, you would also think commercial property might be another sector that puts up a rights issue or two."

Johnston Press's rights discount announced yesterday was 61 per cent, Bradford & Bingley's is 48 per cent, while HBOS's was 45 per cent and RBS 35 per cent.