Bankers drive Pendragon to reduce debt

14th Jul 2011 12:38

The UK's largest motor dealer Pendragon is to tackle its debt mountain at the behest of its bankers through a deeply discounted rights issue.The company intends to raise £75.2m (about £70.8m net of expenses) through the issue of shares at 10p each, which will be offered to existing shareholders n the basis of nine new shares for every eight currently held. The new ordinary shares to be issued will represent around 52.9% of the enlarged share capital of the company following the rights issue.The company has also completed a refinancing of existing debt, extending the maturity of its borrowings to June 2014, on what it described as acceptable terms.Pendragon said, "Despite the group's encouraging operating and financial performance, it became clear from these discussions [with its lenders] that, without a material reduction in the size of the existing facilities, it was unlikely that they could be revised on acceptable terms."In addition to announcing its plans to reduce debt, the company, whose Stratstone dealerships sell premium models such as Maserati and Mercedes-Benz, intends to resume paying dividends from financial year 2012. In February, Pendragon said it would not pay its full year dividend.Separately, the new and used car dealer agreed on a new pension deficit reduction plan that will eliminate current pension deficit and reduce cash outflow by £46m up to December 2014.Pendragon also added that trading and outlook for the year is in line with expectations.Shares of the company, which have lost more than 15% in the last one month, dropped 3.5% to 21p in afternoon trading in London.AR