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Equity raise needed for Challenger (ASX:CGF), who warn of no final dividend

ASX 200
ASX:CGF      MCAP $4.454B
23 June 2020 11:30 (AEST)

Challenger Life (CGF) has announced it will undertake a $300 million equity raise, with the money raised to be spent on ‘investment grade’ fixed income investment opportunities.

The ASX-200 lister said it plans to ‘prudently and progressively’ deploy the money, and the opportunities on offer should deploy stronger returns than current investments.

The equity raise consists of a fully underwritten institutional placement for $270 million. 55 million new, fully-paid ordinary shares will now be issued to institutional investors at a price of $4.89 per share.

The placement will be further bolstered by a share purchase plan (SPP), with a target amount of around $30 million. Eligible shareholders will be able to purchase up to $30,000 worth of shares, at a price of $4.89 per share, plus a two per cent discount to the volume-weighted average price (VWAP) up to the SPP’s closing date.

Alongside the capital raise, Challenger also revealed yesterday that its board was planning that no final FY20 dividend would be paid in September.

The decision is being blamed on uncertain economic conditions, investment market volatility and intention to maintain a strong capital position while optimising earnings.

Speaking on the capital raise, Challenger Chief Executive Officer Richard Howes said the investment management firm needed to act on these new opportunities, considering the current market.

“Raising additional capital will support our business to remain strongly capitalised so we are well placed to withstand and respond to further market volatility,” he said.

“At the same time it will provide us with flexibility to take advantage of selective investment-grade opportunities with attractive returns,” he added.

The investment management firm was placed in trading halt yesterday, ahead of the announcement.

However, Challenger shares opened down six per cent today, at $5 per share.

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