Atrium European Real Estate, the central and eastern European retail developer, has agreed to raise €72 million ($95 million) of fresh equity following an aborted €300 million rights issue.
The company, in which Citi Property Investors and partner Gazit-Globe injected €500 million last year through convertible loan notes, says the equity raising initiative has been approved by a committee of independent directors established by the new investors.
Atrium has taken action to avoid the danger of Citi and Gazit-Globe having to make a mandatory takeoever offer for Atrium under Austrian takeover rules – something the new investors are keen to avoid and did not envisage when they took a stake in the company last August.
The danger surfaced because not enough existing shareholders took up the €300 million rights issue last year at €7 a share. If Citi and Gazit subscribed to take up the outstanding shares, it would dilute existing shareholders ownership and drive Citi’s and Gazit’s stake above 30 percent. At this level, the investors could potentially be forced to make a mandatory takeover offer for Atrium.
In a statement, Atrium said the equity fund raising would raise €72.1million of new equity, reduce the company’s indebtedness by at least €103 million and significantly reduce the equity overhang of the outstanding warrants to subscribe for the company’s shares from €30 million to approximately €5 million. The private placement and other arrangements will replace the €300 million rights issue that was proposed be completed by the end of January 2009, it stated.
Existing shareholder are unlikely to want to subscribe for new shares now seeing that the share price has crashed to as low as €1.55 a share in recent months – way below the initial share price issue at €7 a share.
Rachel Lavine, chief executive officer of the company, said: “Given the unprecedented continuing uncertainty and volatility in the capital markets and the uncertainty regarding the application of the Austrian Takeover Act, I am very pleased that the company has been able to reach agreement on a transaction that includes an appropriate equity subscription by the investors and a further reduction of the company’s outstanding indebtedness.”