FirstGroup closes in on healthy take-up for £615m rights issue

David Hellier
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FIRSTGROUP, the heavily indebted transport group, is expected to announce a successful conclusion to its £615m rights issue tomorrow.

Investors in the company, which lost out on the chance to run the potentially lucrative west coast rail franchise, were far from unanimous about the need for a large equity issue.

But the group, which is chaired by Aberdeen Asset Management chief executive Martin Gilbert, argued it needed the new funding to avoid a credit rating downgrade and issued new rights shares at 85p each, a bumper 62 per cent discount to the price ahead of the deal.

Despite brokers at UBS cutting their price target for the company, FirstGroup shares have not fallen below 90p, and were yesterday at 98p, comfortably above the 85p rights price.

Bankers on the deal signalled their confidence in the take-up of the rights shares, predicting a take-up of possibly more than 90 per cent. That would represent a significant achievement given the lack of enthusiasm for the issue when it was first announced.

Former JP Morgan banker Ian Hannam advised the board, alongside JP Morgan, Goldman Sachs and Bank of America Merrill Lynch.