WYG looking to new era as it pushes ahead with fundraising

DESIGN and engineering consultancy WYG yesterday laid out its path to growth by confirming a £30m fundraising which will free it of bank control and leave it with cash to build.

The Leeds-based group said it has brought on board a range of unnamed institutional investors through the oversubscribed placing, but added the hugely dilutive capital restructure will leave existing shareholders with just 1.1 per cent of its equity.

WYG needed to raise the cash after coming close to breaching its banking covenants and struggling to achieve profitability amid deeply depressed UK and Irish markets. It warned earlier this month its debt and the costs of servicing it are unsustainable.

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Under the deal, the group’s lenders, Lloyds, Royal Bank of Scotland and Fortis, have accepted hefty writedowns on the £51m they are owed.

In total, they will have effectively written off about £100m of WYG’s debt over the past two years.

WYG, which is currently majority owned by its banks, said the restructuring already has the backing of 85 per cent of its shareholders, making a vote next month a formality.

Finance director David Wilton said the complex deal is the “best outcome for all the stakeholders”.

“It feels very positive. We had a story that was backable,” he said. “We’re looking forward to growing this business. We’ve spent two years knocking it around.”

The group will have net cash of about £30m when the restructuring is completed in mid-July.

Chief executive Paul Hamer added: “By creating a significant positive cash balance and the means to retain and incentivise our employees, these proposals will establish a stronger platform from which to take advantage of the growth opportunities that now exist for WYG.”

WYG completed a “survival restructure” in 2009 which saw shareholders substantially diluted and its banks take a 60.5 per cent equity stake.

Mr Wilton said the group considered all its options for the latest deal, including a sale or capital injection, and had always planned a second refinancing.

“I don’t think you could have done it in one go,” said Mr Wilton. “It was not a backable proposition at the back end of 2009. People won’t buy something until it’s fixed.”

Under previous management, WYG, formerly known as White Young Green, bought 38 companies between 1997 and 2007, leaving with a hefty debt burden.

But faced with the risk of insolvency when the recession arrived, its current management has cut £110m from its cost base, including halving its workforce to about 1,500.

It said for the past three years it has been operating in a “highly cash-constrained environment”.

The issue of 64m new shares at a price of 50p each will raise £32m, or £30m after expenses, and is fully underwritten by investment bank Numis.

WYG, which is focused on buildings and infrastructure, transport, energy and the environment and assurance services, will use some of the proceeds to help fund its growth abroad.

WYG will consolidate every 50 existing ordinary into one new share. Shares in the company crashed 78 per cent to 1.88p.

Chairman Mike McTighe said: “Much has been achieved over the past two years to recreate a stable operational platform.

“The proposals will provide WYG with significant positive cash balances, a strengthened balance sheet and the ability to incentivise its employees, so creating a significantly stronger position from which to take advantage of the growth opportunities that now exist for the group.

“The board is grateful for the support of all of its stakeholders over the past two years, and in particular for the support of its lenders, which has enabled the group to reach this significant milestone in the group’s development.” About £51m of the group’s net debt will turn into 4.5m convertible shares.

If converted into ordinary shares, WYG’s lenders will hold about five per cent of its equity. These shares will not convert until the group’s share price rises above 150p.

The group has also created a racheting employee incentive scheme where staff will receive up to 21.6m new shares – equivalent to 25 per cent of the company’s enlarged share capital – depending on WYG’s share price rising between 100p and 150p.

Another £30m of preference shares held by its lenders and an employee benefit trust will be converted into deferred shares, which will have no economic value.

Shareholders will vote on the deal on July 11.