By Eli Greenblat
Grains marketer and rural services provider AWB is in discussions to sell its AWB Geneva division as the struggling agricultural company shifts its focus to broadening its services and insurance offering under its Landmark brand and paying down its bloated group debt levels.
AWB is also winding down its activities in Brazil and will minimise its operations in India. As part of a wide ranging structural reorganisation and capital strategy AWB will seek a partner for its Australian Commodities Management business.
AWB Geneva recorded pre-tax earnings of $27 million for the six months to March.
AWB announced this morning it would seek to raise $459 million from the sale of new shares to reduce debt which currently stands at $1.136 billion. AWB will seek to raise $359 million in a one-for-one entitlement offer and $100 million in an institutional placement.
Along with the capital raising AWB announced it expected to report a deeper annual net loss than previously advised with a loss of between $228 million and $259 million for the 12 months to September 30 now tipped.
AWB's continuing businesses were expected to report a profit before tax and significant items in the 2010 full year of $95 million to $115 million, prior to equity-raising benefits. In August, AWB said it expected to report a net loss of $120 million to $156 million for its 2009 fiscal year, dragged back by its loss-making Brazil operations.
The company has booked a $120 million goodwill impairment on its Landmark Financial Services unit, which has been affected by reduced margins.
AWB said today it will offer new shares under the capital raising at $1 each - a 31 per cent discount to Tuesday's closing price of $1.445. AWB shares are currently in a trading halt.
The equity raising will mean AWB will reduce its net debt to $490 million by September 30, from $1.136 billion the year before.
''The capital raising is being undertaken to strengthen AWB's balance sheet and to provide financial flexibility through the subsequent reduction in net debt,'' chief executive Gordon Davis said.
Under the entitlement offer, about $115 million will be raised from institutional investors and $244 million from retail investors.
AWB also said that it had agreed with its bankers to refinance $575 million of domestic debt facilities, which were due to mature in October.
The equity-raising and debt-refinancing would also help AWB maintain its investment-grade credit rating.