Pendragon's revving up as it unveils plans for £75m cash call to tackle debt

Britain's biggest motor dealership has pushed the start button on a £75 million-plus cash call in a bid to tackle its debt and secure its finances.

Pendragon, which runs scores of sites under the Evans Halshaw and Stratstone names, will raise the funds through the issue of new shares. It has also agreed to a new three-year financing deal with its bankers.

The group, which in February said it would not pay a full-year dividend as it focuses on reducing debt, now plans to resume shareholder payments from its 2012 financial year.

News of the fund-raising came as Pendragon reported an underlying pre-tax profit of 9m for the five months to the end of May, up 1.1m on a year earlier.

Its volume car division, Evans Halshaw, reported a strong performance from used car sales, but the firm warned that Stratstone - which sells premium ranges such as Maserati and Mercedes-Benz - had been held back by timing issues related to new model launches.

Shareholders will receive nine shares for every eight held, at a price of 10p per new ordinary share.

The fundraising will help the company reduce its debt to some 360m as well as allow it to proceed with a plan to eliminate its 40m pension deficit.

Pendragon's borrowing facilities will be extended to June 2014 if the 75.2m rights issue is successful.

Chairman Mike Davies said the move marked "an important step in the evolution of Pendragon".

He added: "These proposals recapitalise the group providing it with greater strength and flexibility."

Mike Allen, an analyst at Numis Securities, said: "We believe the rights issue is good news in the longer term, which should allow the company to run the business on reduced leverage, allow a dividend to be paid in 2012 and also unlock significant cash flow through the reduction of the pension deficit."

The brokerage expects Pendragon to report pre-tax profits for the first half of 18.8m, compared to 15.7m the previous year.