F&P Appliances turns to Haier for support

Chinese company Haier will take a 20% cornerstone shareholding in Fisher & Paykel Appliances products as part of a dramatic restructure announced today.

After posting an annual loss of $95.2 million, F&P Appliances confirmed Chinese company Haier will take a 20% stake worth up to $82.2 million and announced plans for a $143 million rights issue from investors.

The equity raising, flagged in a shock trading update in February, is hoped to reduce debt by approximately $306 million.

The company has an agreement with bankers for a new $575 million debt refinancing package for the appliance business.

As at March 31, total outstanding debt was $518 million. The company estimates total net debt will fall to $153 million by March 2010.

The total equity raising of $189 million consists of a $46 million initial placement at 80c a share to Haier and a fully underwritten $143 million pro-rata renounceable rights issue.

The rights are to be issued on a one for one basis, at an issue price of 41c a share.

The company plans a top up placement to Haier of up to $12 million to ensure a shareholding of 20%.

The rights issue is fully underwritten by Deutsche Bank and First NZ Capital.

“Based on its current outlook, the Directors are confident that the proceeds from the capital raising, together with the other debt reduction initiatives being undertaken, will be sufficient to meet the challenges of the current economic climate and the capital needs of the Company,” F&P Appliances says in a statement.

F&P Appliances said in February that falling sales had reduced working capital needed to relocate factories to Thailand and Mexico.

A sharp decline in the Kiwi dollar saw bank debt blow out to about $570 million, forcing the company to look at capital raising options.

Today’s result announcement confirmed the company’s difficult predicament.

While a recent rise in the kiwi dollar has helped reduce some debt it has also cut into sales revenue.

Appliances operating revenue of $1.27 billion for the year to May was down $16.9 million (1.3%).

Currency translation effects, due to the appreciation in the value of the New Zealand dollar, reduced sales revenue by $74.9 million compared to the previous year and concealed sales growth of 4.5% in local currency.

Capital raising details

* Initial placement to Haier of $46.5 million at $0.80 per share
* Fully underwritten rights issue of $142.9 million (1 for 1 at $0.41)
* Haier fully participates in rights issue
* Potential top up placement to Haier of up to $11.9 million
* Primarily used to reduce Appliances’ bank debt
* $15.0 million to be applied to Finance business as capital injection
* Haier total investment of between $79.8 million and $82.2 million