Bethunes seeks new investors in deeply discounted rights issue
Bethunes Investments [NZX: BIL], formerly known as Mowbray Collectables, is looking to raise up to $2.87 million at a 93% discount to the current share price, and wants new investors to help keep its struggling auction houses afloat.
The Wellington-based antiques dealer is looking to raise cash via a 15-for-one renounceable rights offer, priced at 1.5c per share, with plans to raise a minimum of $1.5 million, it said in an announcement on the NZX. That's a 93% discount to the company's 20c per share trading price.
The directors want a new investor because outgoing managing director, company founder and 40% shareholder, John Mowbray, won't take part in the rights issue. Mr Mowbray bought subsidiaries Mowbray Bethunes and Wildlife Philatelic for $950,000, leaving the renamed Bethunes with auction house Webb Galleries as its sole trading entity.
The company used the cash to reduce debt, pay legal, accounting and NZX fees, including a $75,000 cash bond to the stock exchange, and injected $20,000 into Webb's. Although Bethunes has no bank debt, Webb's still has $1.15 million in term debt and working capital overdraft, the company said.
"Bethunes simply has too great a debt burden for a small company, particularly given the volatility that Webb's (its only trading subsidiary) is currently experiencing in the auction market, coupled with the sizeable business interruption from moving premises which has affected the number of auctions held to date," the company said. "Bethunes needs to address Webb's debt burden to provide time and breathing space if it wishes to maximise value for Webb's in the future or pursue other options such as a sale of Webb's (in which case there is no guarantee the proceeds would be sufficient to discharge the current debt burden in full)."
The company bought the remaining half of Webb's last year as part of a bid to return to profitability. However, since taking control, Webb's operational results have underperformed forecasts presented during the valuation, and "it is now clear that the purchase price of the 51% was too high," the company said in November.
Annual losses widened to $2.95 million in the year ended March 31, from a loss of $112,000 a year earlier, while sales rose 39% to $2.3 million.
The company said as at balance date, its net assets were 8.6c per share, while net tangible assets per share stood at negative 4.1c.