Regional REIT announces £110.5m capital raising to strengthen financial flexibility and market position

Regional REIT Limited (LSE: RGL) has announced a significant Capital Raising initiative amounting to approximately £110.5 million. This move is structured through a Placing, Overseas Placing, and Open Offer of 1,105,149,821 New Ordinary Shares at an issue price of 10 pence per share. The deal is fully underwritten by Bridgemere Investments Limited, part of the Bridgemere group established by Steve Morgan CBE. This strategic financial maneuver is set to profoundly enhance the company’s liquidity and operational flexibility, particularly by addressing its upcoming £50 million Retail Bond maturity.

The proceeds from this Capital Raising will be pivotal in repaying the £50 million Retail Bond, thereby eliminating this short-term liability. Additionally, £26.3 million will be allocated to reduce existing bank facilities, significantly increasing covenant headroom. The remaining £28.4 million is earmarked for selective capital expenditures to boost both near-term earnings and long-term asset value, solidifying the foundation for sustainable quarterly dividends. This strategic allocation will decrease the loan-to-value ratio from 56.8% to a more manageable 40.6%.

Kevin McGrath, Chairman of Regional REIT, emphasized the thorough evaluation process undertaken to identify the most beneficial strategy to reduce indebtedness and address the retail bond maturity in August 2024. Stephen Inglis, CEO of London & Scottish Property Investment Management Limited, which manages the assets, highlighted the resilience of the company amid the challenging conditions imposed by the COVID-19 pandemic, further underscoring the necessity and timeliness of this Capital Raising.

The offer is notably attractive as it represents a significant discount of 50.4% compared to the closing price of 20.2 pence. The comprehensive details, including terms of the Share Consolidation and conditions of the offer, are set to be elaborated in the Prospectus due to be published later today. This extensive Capital Raising is conditioned upon shareholder approval at the forthcoming Extraordinary General Meeting scheduled for 18 July 2024.

Since the onset of the pandemic, Regional REIT has navigated through tumultuous market conditions that reshaped the landscape for office space demand. The downturn in property values necessitated a strategic response to align the loan-to-value ratio with industry benchmarks, thus ensuring financial stability and operational agility in the evolving market.

Post-capital raising, the company anticipates paying a dividend of approximately 2.2 pence per Ordinary Share for Q2 2024, reflecting a renewed stability and confidence in its financial health. Moreover, the introduction of a Share Consolidation will aim to enhance market liquidity and appeal to a broader investor base.

This capital enhancement plan by Regional REIT Limited represents a proactive strategy to fortify its financial base and strategically reposition itself in a competitive market. The comprehensive approach not only addresses immediate financial obligations but also lays down a robust framework for future growth and stability.