Investors back Optare £7.4m share issue

INVESTORS have fully subscribed to busmaker Optare’s £7.4m share issue but the company has warned that credit restrictions imposed by suppliers are continuing to put pressure on working capital.

The firm has raised the cash to help cover the cost of a factory move in Leeds, reduce debts and ease working capital.

Today it said it was seeing an increase in orders and production, but supplier credit restrictions had placed “significant pressure” on its working capital position.

The issue of 370 million new shares at 2p requires approval at a general meeting on March 4. The company has urged shareholders to back the plan because failure to do so would force the directors to look at other options which they say would not be in the shareholders’ interests.

“Shareholders should be aware that, if the resolutions are not approved at the general meeting, the company will be unable to complete the placing. This would require the company to seek to finance its ongoing operations and the factory relocation through alternative means.

“Whilst the directors believe that there are a number of possible options to achieve this, they do not believe that these alternative options would currently be in shareholders’ best interests.”

Last month Optare, which has orders worth £43m, warned that the lease on its Leeds factory was not expected to be renewed beyond the end of 2011 and it was looking to relocate to a “new local facility”.

Today it said it had identified a new site and is in discussions with landlords. It expects the new location to support the company’s growth and be a more efficient base.

Chief executive Jim Sumner said: “This placing is a significant milestone after more than 18 months restructuring and repositioning the business. These funds will allow relocation of the business from our current ageing Leeds factory to a new facility with the capability to considerably increase capacity.

“In addition, term debt will be reduced significantly. These key objectives will help support growth of the business with a record order book now standing at £43m. I continue to be very positive about the Company’s prospects in 2011 and beyond.”

A legal team led by corporate partner, Paul Emmett, from Leeds-based Walker Morris, advised Optare on the placing. 

Last year Optare sold a 26% stake to the Indian firm Ashok Leyland. Ashok is backing the share issue and has agreed to take nearly 100 million shares. Nonetheless its stake will remain at 26% due to the enlarged share capital.