Cosalt in £18.9m share placing

SAFETY equipment group Cosalt has announced an £18.9m share placing to help the group reduce its debt and provide more financial stability.

The planned move by the Grimsby-based group, which provides safety equipment such as liferafts and lifejackets for the marine and offshore oil and gas industries and equipment for use in other hostile environments, follows a number of recent approaches from parties interested in buying the company.

Cosalt revealed last month that it intended to raise cash through a share placing in order to avoid breaching its banking covenants.

Cosalt is to issue 378m new ordinary shares at 5p per share, a discount of 84% to its closing share price yesterday. After expenses it will raise £17.1m.

The group recently posted a £3.4m half year loss which it has put down to trading volatility and has embarked on a strategy to reduce overheads by £3m a year.

It said today that the “urgent need to address the financial position of the company” superceded the uncertainty about whether any of the approaches from parties interested in buying the company would lead to a formal offer and that the share placing would take precedence.

It said if the share placing does not progress, the group may be forced to regnotiate its banking facilities with The Royal Bank of Scotland and HSBC.

The cash will allow it to operate more comfortably within its banking facilities.

Chief executive Mark Lejman said Cosalt was focusing on its Cosalt Marine and Cosalt Offshore divisions because of the “inherently stable characteristics of the markets that these business units serve” and that they provided “a more stable platform for the future growth of the business” with growing order books.

Mr Lejman said: “The raising of additional equity will provide the group with the opportunity to reduce net debt levels and provide the group with a more appropriate, stable, long-term funding structure to take advantage of the opportunities in our chosen markets as conditions improve.”

Chairman David Hobdey described the fundraising as a “key milestone” for the group.

“With increasingly stringent regulatory requirements concerning safety and protection, we are in an excellent position to actively extend our comprehensive range of products and services, and to take advantage of those requirements, for both the offshore and marine markets,” he said.

Cosalt said the placing would also provide further headroom under the covenant levels in its existing bank facilities.

Law firm Pinsent Masons in Leeds, led by corporate partners Andrew Black and Martin Shaw, and supported by Adrienne Davie, Shiv Sibal and Michael Walby, advised Cosalt on the share placing.

Thomas Dyer and Jodie Dennis also advised while Rory Cray and Paul Abthorpe provided advice on employee share schemes and Michael Kidd advised on negotiations with Cosalt’s banks, RBS and HSBC.

Martin Shaw, Pinsent Masons’ head of corporate, Europe, said: “We are delighted to have advised Cosalt on this significant fundraising, which reinforces its ability to trade through the difficult economic conditions prevailing at this time.”

Existing Shareholders can apply for up to 180m new shares under the offer and admission of shares to the London Stock Exchange is expected to take place on September 2.

Evolution Securities acted as broker and joint sponsor to Cosalt in connection with the placing with Noble Grossart acting as financial adviser and joint sponsor to Cosalt.

Cosalt’s auditors, KPMG, acted as reporting accountants to Cosalt in connection with the fundraising.

DLA  Piper acted for Evolution Securities and Noble Grossart.