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Ramsay warns of European uncertainty as it launches $1.4b capital raising

Ramsay offered new shares to investors as it launched a $1.4 billion capital raising on Wednesday.

The sale is comprised of a $1.2 billion share placement to fund managers at $56 apiece, 12.9 per cent below the stock’s last closing price of $64.29, and a share purchase plan of up to $200 million for retail investors. The institutional placement represents about 10.6 per cent of Ramsay’s existing shares and is fully underwritten by broker JP Morgan Securities Australia.

It is the largest capital raising pitch by an ASX company since the onset of the coronavirus pandemic. Other firms have tapped investors for support, including Cochlear’s $880 million placement in late March. Businesses have been granted more flexibility to raise cash throughout the crisis, with rules relaxed to let larger companies raise up to 25 per cent of their market value in a placement provided they also offer a share purchase plan.

The company will use the proceeds to pay down debt and strengthen its balance sheet at a time where private hospital operators around the world are facing business uncertainties such as the suspension of elective surgeries and the treatment of COVID-19 patients.

Giving it further financial leeway, the company will shelve paying dividends to shareholders and has struck a deal with lenders to the Ramsay Funding Group to waive key banking covenants up to December 2020. This means lenders have agreed to amendments or waivers of loan conditions that would have had to have been met at covenant tests in June 2020 and December 2020.

Tapping shareholders for money “will strengthen Ramsay’s balance sheet and liquidity position, as well as increase financial flexibility during the unprecedented operating environment,” Mr McNally said in a statement to the ASX.

“More importantly, it will ensure that we can continue to pursue our growth initiatives and position us to take further advantage of other growth opportunities that may arise.”

Ramsay withdrew its full-year profit forecast in mid March after hospitals across Europe began cancelling elective surgery procedures in the face of the virus.

The business, which posted a $273 million profit in the six months to December 2019, said it was working with doctors on a staged return to elective procedures in Australia, putting safety considerations first.

Shares were placed in a trading halt on Wednesday morning after closing at $64.29 on Tuesday.

Ramsay has also entered into agreements with governments in Australia, the UK and France so it can receive support and at least meet operating costs while its private hospitals are used to help public health systems treat COVID-19 patients.

“This government support and the capital management initiatives will ensure Ramsay’s ability to maintain its extensive hospital platform intact,” Mr McNally said.

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