Hammerson unveils EUR 670m rights issue

UK real estate group Hammerson confirmed on Monday that it is seeking to raise net proceeds of £584 mln (just under EUR 670 mln) in a fully underwritten 7-for-5 rights issue to reduce its debts and cut its gearing level.

The rights issue, which has to be approved by shareholders at a general meeting on 25 February, is fully underwritten by Citi and Deutsche Bank. The operation involves the issue of 405.8 million new shares at £1.50 per share. The pricing is a 62% discount on the closing price of Hammerson's shares on 6 February.

Hammerson, which is mainly involved in the retail property sectors in the UK and France, will reduce its gearing ratio to 81% from a peak of 118% in December.

The company made the announcement on the rights issue as it reported a net loss of a loss of £1.57 bn last year compared with a profit of £112 mln in 2007.

Chairman John Nelson said the company had been taking steps in the last 18 months to reduce its gearing. This involved reducing development expenditure and overheads, but the main focus has been on selling assets. Hammerson said it had sold assets and used the net proceeds of £783 mln to repay debts.

But the worsening of the global financial crisis in recent months has limited sale opportunities. 'Given the lack of debt finance available to potential purchasers to fund acquisitions, negotiations regarding sales are proving protracted and the outcomes uncertain,' Nelson said.

'In the event that the company is unable to execute disposals and that the market value of the groups' property portfolio continues to decline, there is a risk that the company could breach its gearing covenant in the future.'

Hammerson's gearing increased from 77% at end-June 2008 to 118% at the end of the year due to the phenomenal drop in property valuations in the UK and more recent sterling-euro exchange rate movements. Hammerson's tightest gearing covenant limit is 150%.