Germany's Gagfah raises €176m with capital hike

German listed residential property company Gagfah has raised €176 mln through the placing of 20 million shares at a price of €8.85 per share.

The company has sold 9.5 million new shares and 10.5 million existing treasury shares.

In addition its largest shareholder Fortress Investment Group has divested another 20 million shares therefore reducing its stake in the company from 60.8% to 48.8%.

The offering represents 19% of the company's total capital.

The shares were offered to qualified investors only and both Gagfah and Fortress have agreed to a 120-day lock-up period from the closing of the transaction.

Gagfah will use two-thirds of the net proceeds to optimise its capital structure through the repayment of higher interest-bearing loans understood to be secured by properties in the Nileg portfolio. That portfolio was acquired for €1.5 bn from state-owned bank Nord/LB in 2005.

The remaining one-third of the net proceeds will be used for capital expenditure projects.

'We regard the planned use of the proceeds as advisable, as it should improve and de-risk the debt profile further, and the markets should also welcome any progress regarding the €1.5 bn debt expiries in the next year,' commented Berenberg Bank's analyst Kai Klose in a note to clients.

Gagfah's stock has been trading at a roughly 30% discount to net asset value in the recent past.