Lendlease announced a raising of up to $1.15bn $9.80 per share.
The equity raising comprises a fully underwritten $950m institutional placement, along with up to $200m via a non-underwritten SPP. With the proceeds from the placement, liquidity will increase to $4bn and company gearing will fall to 10-15%, (assuming completion of the sale of the Engineering business).
A correction in commercial real estate will provide new opportunities for Lendlease but will also ensure a tough operating environment in the near-term.
We remain bullish on the urban redevelopment business model and are further encouraged by the announcement LLC has entered into an agreement with Acciona to sell its engineering business for $180 million.
Lendlease is a current holding in our ASX 100 model portfolio.
The market has discounted LLC share price due to substantial impairments on troubled projects within their engineering business.
The group reports earnings on the 25th of Feb and we expect to hear whether an exit of this business is likely. Investors have lost patience regarding a turnaround and a trade sale or spin-off of the division will be well received by the market.
If confidence is restored and investors can look through the short-term troubles, LLC could re-rate back towards $15.00