LONDON (Alliance News) - Flooring maker Victoria PLC said Tuesday it has abandoned a proposed EUR450 million bond issue amid unattractive pricing, as it continued to seek to soothe concerns about its intentions in proposing fundraise in the first place.
In late October, Victoria announced it intended to offer EUR450 million in senior secure notes due 2023. The proceeds from the bond would be used "solely" to refinance its current two-year facilities and to pay related costs and would not increase overall debt.
"Whilst we continue to believe that, in terms of structure, the bond would have been suitable for the group to meet its long-term financing objectives, the indicative pricing for the bond, which was higher than had been anticipated, was such that it did not warrant changing the group's debt financing arrangements at this time," Victoria explained in a statement.
Consequently, Victoria decided to retain its existing bank facilities.
"We embarked on the bond process in good faith and with the intention of delivering benefits for all shareholders in the form of long-term funding at an attractive, fixed interest rate," Victoria Chairman Geoff Wilding said.
"It is very disappointing that despite the positive, stable credit ratings, the indicative pricing for the bond moved unfavourably over the course of last week, particularly when there have been no fundamental changes to the group or its business," Wilding added.
Last Wednesday, credit rating agency Fitch Ratings gave a BB Stable rating for the bond which was followed the day after by a BB- rating from Standard & Poor's.
Wilding also sought to allay fears about the relationship between Victoria and its lending banks. Speculation of a deterioration with its banks following the surprise announcement of the bond had led to the firm issuing a statement explaining the reasoning for its bond issue last Wednesday.
"I want to reassure shareholders that, as with our strategy of only paying the right price for acquisitions, the board applies a high degree of rigour to our long-term financing arrangements," Wilding explained on Tuesday.
"Therefore, as we continue to have a close and positive relationships with our lending banks and operate with significant headroom with respect to covenants under our existing two-year facilities put in place in August 2018, we will continue with these facilities," Wilding continued. "The banks have been, and continue to be, very supportive of our strategy and performance. Any suggestion to the contrary is untrue."
Despite this, Wilding admitted that the way in which the bond issue was handled last week was not the "finest hour in terms of the clarity of our communication." This is despite having sought to maintain an "open dialogue" with shareholders.
"Unfortunately, we placed too much emphasis on technical guidance and market convention and not enough common sense was applied in terms of communication with shareholders," Wilding explained.
"By failing to communicate clearly last week and in the run-up to the bond launch, the company needlessly left shareholders feeling uncertain about the future," Wilding added. "Critically, this also left an open goal for those with less than pure motives to spread outrageous untruths."
Wilding noted this had damaged the price of shares in Victoria. Since before the bond was announced, shares in Victoria have lost 32% of their value. On Tuesday, shares were down 5.4% at 408.70 pence.
Despite this, Wilding emphasised this has had "no impact" on the underlying business with it remaining "high quality and continues to successfully design, manufacture, and distribute flooring products around the world as it always has done."
Victoria (VCP)