Join our daily newsletter At The Bell to receive exclusive market insights
- Travel booking group Webjet (WEB) is aiming to raise nearly $300 million to survive the coronavirus crisis, which has wiped out the travel industry
- The company has announced a placement and entitlement offer to raise a minimum of $275 million at an offer price of $1.70 per share
- To save further costs, Webjet has come up with additional strategies
- These include pay cuts for executives, while the Managing Director endures a 60 per cent salary cut for the year
- The company has also sacked over 440 staff, while the majority of remaining employees are now working four days a week
- The new initiatives are expected to save Webjet $13 million per month
- Webjet is still in a trading halt, with shares last trading for $3.76 each
Travel booking group Webjet (WEB) is aiming to raise nearly $300 million to survive the coronavirus crisis, which has wiped out the travel industry.
The company has announced a one-for-one accelerated pro-rata, non-renounceable entitlement offer to raise a minimum of $231 million at an offer price of $1.70 per share, which is partially underwritten to $174 million.
Additionally, Webjet will conduct a placement to raise roughly $101 million.
“The ongoing spread of COVID-19 globally has caused government restrictions on travel, which has resulted in a high amount of cancellation rates and a significant reduction of overall travel activity,” the company told the market.
“Webjet anticipates that any revenue contribution in the near-term will be nominal only, until the situation improves and travel activity resumes,” it continued.
Managing Director John Guscic believes this equity raising positions Webjet in a strong position to help the business stay running due to the impact COVID-19 is causing the travel industry.
“Equally significantly, travel is a core part of life and as the travel landscape recovers, this equity will help the company emerge in a strong position relative to its competitors,” he said.
Business Strategies
To help save the business, the company has come up with additional strategies.
Webjet has reduced Board and Executive remuneration, with the Managing Director taking a 60 per cent salary for this year.
The company has also deferred the $12.2 million interim dividend payment for 2020, but will review this measure in October.
Webjet has sacked over 440 staff, with the majority of the remaining employees now working four days a week. The company has also renegotiated certain operational and technology contracts and has stopped non-essential spending.
The above initiatives are expected to save $13 million per month, with further cost-saving methods if COVID-19 pandemic has not improved in six months.
Proceeds from Capital Raising
The cash raised from the capital raising will be used to strengthen Webjet’s balance sheet, with net debt reduced from $135 million to a net cash position of $140 million.
This will provide Webjet with $470 million in liquidity (as of February 29) based on unaudited management accounts.
This also includes undrawn revolving credit facilities, which is expected to represent a sufficient amount of money to the end of 2020, even if the severe travel restrictions continue.
Webjet is still in a trading halt, with shares last trading for $3.76 each.
