Segro unveils EUR 562m discounted rights issue

Segro's shares rose sharply on Wednesday after the firm unveiled plans for a 12-1 fully underwritten rights issue to raise £500.6 mln (EUR 562 mln). The UK-based real estate investment trust (REIT) said the net proceeds of the rights issue would be used to reduce net debt.

The capital raising reduces the firn's pro-forma gearing at end-December 2008 from 119%. to 77%.

Segro's shares were up almost 15% in trading on Wednesday afternoon to 94.25 pence. Segro is now the fourth UK REIT to roll out a rights issue. British Land, Land Securities and Hammerson have already announced rights issues totalling more than £2 bn. Segro and Brixton, another UK REIT focused on industrial property, saw their share prices punished on 18 February as investors worried the two firms would be left behind in the race to raise capital.

The announcement of the rights issue by Segro propelled the share price higher, even though the company reported that its losses for 2008 came to £939 mln, from £246.5 mln in 2007. Analysts noted the issue was larger than expected.

Ian Coull, CEO of Segro, said: 'Today's rights issue strengthens Segro's balance sheet at a time when the property market and wider economy are facing significant turmoil. The board has already implemented a number of measures to improve Segro's financial position, including increasing the gearing covenant on our banking facilities from 125% to 160% as announced on 25 February 2009, the reduction of our development programme and other cost reductions. The rights issue, combined with the increase to our gearing covenant, will help protect Segro from further falls in property values.'

Coull said the firm would continue its strategy of asset recycling with increased flexibility 'to take advantage of opportunities in a cautious manner when the market recovers.