Royal Imtech update: Higher loss & Rights issue

After last qeek’s first look at Royal Imtech, Imtech came out today with a press release:

The highlights were as follows:

Rights issue will be completely used for debt reduction
Measures to make financial structure more robust
Write-off of 150 million euro for Polish projects
Write-off of 150 million euro for German projects

So this means that the write offs are a lot higher than initially communciated. Back then, they only said “100 mn EUR in Poland”, now we are at 300 mn EUR in Poland and Germany.

In parallel they also reported a change in the CEO positon:

Gouda, the Netherlands – The Supervisory Board of Royal Imtech N.V. (IM-AE, technical services provision within and outside Europe) confirms that in good consultation and in line with the original plan, René van der Bruggen (65) has decided to retire as of 3 April 2013. He will remain a member of the Board of Management until 3 April. He will hand over as Chairman with immediate effect. Gerard van de Aast (55), who is already a member of the Board of Management, is as of now appointed CEO of Royal Imtech and Chairman of the Board of Management

So this could be an interesiting situation. The new CEO will most likely go for a “kitchen sink” approach and write off as much as possible in order to have some “cushion” in the future.

Another aspect is what they say in the first press release:

Royal Imtech N.V. (IM-AE, technical services provider in and outside Europe) announces that the company will strengthen its equity through a rights issue of 500 million euro. The proceeds of the rights issue will be completely used for debt reduction. As a result of this the balance sheet of Imtech will be reinforced

This looks like that the banks have Imtech “by the balls” and could push through the rights issue in their interest. So it is not really a surprise that the share price of Imtech dropped to a new low:

Again, as in the KPN case I would wait until the details of the rights issue are known. With a current market cap of 800 mn EUR, a 500 mn EUR rights issue will require a significant discount.

8 comments

  • This has nothing to do with Imtech directly, but I would like to mention another potential candidate for debt-restructuring to you: Pescanova SA. Apparently they are currently trying to sell some assets and if that does not materialize (I assume it hasn´t) they will have to talk to the banks who will in return ask for additional equity. The price really fell off the cliff in recent days.

  • I agree with you, but maybe the value of the stock is already adjusted , If we add the capital raised 800+500=1300 mn that would be a P/E of 13. Three month ago the market cap was 1500 mn.

    Kind Regards.

  • War wohl doch nicht nur Polen 😉

  • Hello,
    Very good analysis, but I ‘m thinking about the business portfolio of 6,400 million euro, so dont you think that the rights issue of 500 million euro is already discounted in the stock price?

    • Hi Oscar,

      I don’t want to sound like the “know it all scholar”, but a “business portfolio” or the size of a balance sheet has nnothing to do with the value of the stock.

      If the “business portfolio” (whatever that means) would be so great, then why were they not able to persuade the banks in the first place ?

      Raising 500 mn with a market cap of 800 mn and such a big scandal will not be easy. I assume that we see even lower prices, but I could be wrong of cours.

      mmi

    • Hi Oscar,

      I don’t want to sound like the “know it all scholar”, but a “business portfolio” or the size of a balance sheet has nnothing to do with the value of the stock.

      If the “business portfolio” (whatever that means) would be so great, then why were they not able to persuade the banks in the first place ?

      Raising 500 mn with a market cap of 800 mn and such a big scandal will not be easy. I assume that we see even lower prices, but I could be wrong of cours.

      mmi

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