Victoria abandons €450m bond amid ‘outrageous untruths’
Flooring group Victoria has abandoned plans to raise €450m by issuing a bond after the price demanded by investors proved too high.
The group had wanted to use the proceeds to pay off its bank borrowing while having a fixed interest rate for five years.
‘It is very disappointing that despite the positive, stable credit ratings, the indicative pricing for the bond moved unfavourably over the course of last week, particularly when there have been no fundamental changes to the group or its business,’ said Geoff Wilding, Victoria executive chairman.
‘I want to reassure shareholders that, as with our strategy of only paying the right price for acquisitions, the board applies a high degree of rigour to our long-term financing arrangements. Therefore, as we continue to have a close and positive relationships with our lending banks and operate with significant headroom with respect to covenants under our existing two-year facilities put in place in August 2018, we will continue with these facilities. The banks have been, and continue to be, very supportive of our strategy and performance. Any suggestion to the contrary is untrue.
‘Nevertheless, last week was not the board's finest hour in terms of the clarity of our communication. For the last six years, the board has endeavoured to maintain an open dialogue, fully appreciating that it is the shareholders who own the company. Unfortunately, we placed too much emphasis on technical guidance and market convention and not enough common sense was applied in terms of communication with shareholders. By failing to communicate clearly and in the run-up to the bond launch, the company needlessly left shareholders feeling uncertain about the future. Critically, this also left an open goal for those with less than pure motives to spread outrageous untruths. This has damaged the value of the shares, although, of course, there has been no impact on the underlying business.
‘Victoria's operational management are firmly focused on delivery of our organic strategy. Separately, the board continues to identify and very selectively pursue attractive acquisition opportunities. We have adapted our usual acquisition structure in such a way that remains attractive to potential vendors but ensures that future acquisitions remain value enhancing for shareholders by reducing requirements for new equity whilst staying within our internal debt limits. As such we continue to see opportunity to pursue our acquisition strategy to meaningfully enhance the group alongside organic growth.’
Since the end of August Victoria’s share price gradually fell from 840p to 604p, until it revealed the bond plan, when the share price plunged to 350p. Since the plan was abandoned it has recovered to 482p, making the group worth £604.4m.