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(Alliance News) - HSS Hire Group PLC on Monday proposed to raise up to GBP54.0 million gross by way of a firm placing and open offer of new shares, with its three major shareholders - Toscafund Asset Management LLP, Ravenscroft CI Ltd And Exponent Exponent Private Equity LLP - agreeing to subscribe to GBP43.5 million worth of that.
The equipment hire firm also said it is reviewing its listing on the London Stock Exchange, as it has a small free float of shares.
HSS Hire said the Covid-19 pandemic and the significant disruption that it has caused have dealt a blow to revenue in 2020, and it has concluded it is "prudent" to raise capital before the year end.
Earlier this month, the Manchester-based company said it will permanently close 134 branches and enter into consultation with 300 employees as its first half loss significantly widened. For the 26 weeks ended June 27, HSS Hire posted a pretax loss of GBP14.9 million, from GBP7.4 million a year prior. This was as revenue fell 22% to GBP125.8 million from GBP161.4 million.
"Without the capital raise, it is possible that the covenants may be breached when tested at the end of 2020. Consequently, if the capital raise does not successfully complete, the group's lenders may be in a position to declare a default of the group's debt, which could cause shareholders to lose all or a substantial part of their investment in the company," HSS Hire explained on Monday.
As at June 27, the company's net debt stood at GBP156.7 million, a reduction of GBP22.8 million from December 28, 2019.
The new shares are to be issued at 10 pence each, which is a 55% discount to Friday's closing price of 22.40p. Shares on Monday were down 0.9% at 21.00p each in London.
HSS plans to place GBP18.6 million worth of shares with Toscafund and Ravenscroft. The open offer is expected to raise GBP35.5 million, with Exponent committing to subscribe for GBP15 million of shares under the open offer. Toscafund and Ravenscroft have committed to subscribe for their pro-rata entitlement under the offer.
The company will use the funds to continue investment in its technology platform, invest in its hire fleet, and repay GBP15 million of debt that falls due in January 2021.
In addition, HSS said it is exploring alternative listing venues for the company, given that its three major shareholders own around 78% of its issued share capital.
"This transaction is a major vote of confidence from three shareholders representing over 75% of the company's shares. It is testament to the significant strategic and operational progress HSS Hire has made since the start of 2018 as well as its resilience in challenging economic conditions. This capital injection will enable the group to further reduce its leverage - one of our foremost objectives - and gives us a strong platform from which to continue to implement change and drive growth," Chair Alan Peterson said.
By Tapan Panchal; tapanpanchal@alliancenews.com
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