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Wednesday 13th May 2009 |
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Pacific Brands shares soared 18% after the maker of Bonds and Holeproof underwear raised A$165 million in a placement, allowing it to repay debt and bolster its balance sheet.
The shares jumped 13 cents to 83 Australian cents on the ASX as analysts upgraded their ratings on the company, with the influx of cash seen reducing the threat of a fire-sale of assets. Macquarie Research analyst Greg Dring raised the stock to ‘outperform’ from ‘underperform’ and said the company was now relatively cheap with the reduction in financing risk.
“Equity holders now have increased assurance in ascribing value to their equity,” Dring said in a report today. “The risk of banks undertaking asset sales for distressed prices to recover their loans has all but diminished.”
Dring is the third analyst to raise his rating on Pacific Brands, after the stock was raised to ‘buy’ from hold at Royal Bank of Scotland and upgraded to ‘overweight’ from ‘neutral’ at JPMorgan Chase.
The company’s institutional placement was oversubscribed, the company said yesterday. It aims to raise a total A$256 million, with a A$91 million underwritten entitlement offering to investors.
The capital raising Gives Pacific Brands “additional financial flexibility to withstand any further softening in the retail environment,” chief executive Sue Morphet said in a statement.
Shares of Pacific Brands have soared 105% in the past month. In response to dwindling demand in the shrinking Australian economy, the manufacturer is eliminating more than a fifth of its workforce, slashing dividends and paring back its range of brands to focus on its biggest sellers. It is also outsourcing manufacturing to cut costs.
Businesswire.co.nz
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