Shares in Premier Inn owner Whitbread Plc tumbled 16% after it said it will seek £1.01 billion in fresh cash from shareholders to help weather the COVID-19 crisis.
The 278-year company said that it will offer its owners one new share for every two existing shares in a fully-underwritten rights issue, aimed at bolstering its balance sheet and boosting investment while other budget-branded competitors struggle with the fallout of the pandemic.
The new shares will be offered at 1,500 pence per share, a 37.4% discount to the theoretical ex-rights price (TERP).
"While no shareholder likes to have to put their hands in their pockets there is a certain logic to be had with the raising of this extra cash," CMC Markets analyst Michael Hewson said.
With British holiday-makers unable or unwilling to travel abroad, Whitbread has an opportunity to take advantage of a big increase in "staycations", he said.
Pre-Tax Profits, Dividend And Reopening Expectations
Whitbread, which owns brands such as Premier Inn, Beefeater, Brewers Fayre and Bar + Block, said separately that its full year adjusted pre-tax profits dropped 8.2% and that it has suspended its dividend as part of its cash conservation efforts.
The hospitality sector has been hit hard by the pandemic and is expected to implement strict health guidelines as governments ease lockdowns.
Whitbread expects its hotels and restaurants in the UK to remain closed or operate at low occupancy levels until September.
JP Morgan and Morgan Stanley are joint global coordinators on the offering.
News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.
