ITALY – Prelios, an Italy-based real estate asset management and services company, has begun a capital-raising operation to strengthen its financial position after a rising debt balance in recent years made the business virtually unsustainable.

The fundraising operation, which started on 22 July, consists of a rights issue whereby the real estate asset manager offers 193m new ordinary shares at a price of €0.5953 to existing shareholders (a ratio of 23 new shares to 10 shares already held).

The new shares can be traded until 1 August while the option rights may be exercised until 8 August.

After this term, the new shares that have not been bought by existing shareholders will be sold through an auction. 

The capital increase is part of a broader operation aimed at a "financial rebalancing and equity strengthening".

Prelios intends to raise a total of €185m.

Of this, €115m would come from the current capital increase and the remaining €70m from a reserve capital increase, with a number of investors agreeing to buy the 'class B' shares with no voting rights.

At the end of the operation, Prelios will have €100m of cash to its balance sheet.

In a statement, it said the capital increase was backed by the company's lenders.

The operation is the result of a long struggle to put the business back on track.

Since the 2008 financial crisis, the real estate company had started seeing its investments collapse.

As a consequence, the debt balance reached €560m.

Now the group is consolidating its repositioning according to a "pure management company" model, with less risk and equity.

In addition to the capital increase, the company has managed to refinance €250m of its senior debt at rates the company deemed "consistent".

It has also negotiated a debt-to-equity swap option of €269m.

The €70m reserve capital increase will be subscribed by Fenice (a new company backed by Pirelli), Intesa Sanpaolo, UniCredit and Feidos 11 (owned by Feidos of Massimo Caputi), Rovati, Diaz della Vittoria Pallavicini and Cornetto Bourlot families.

The operation allows Feidos 11 to join the company as new industrial investor with business management and development responsibilities.