Firstgroup slumps on £615m rights issue

FirstGroup, which runs the Aircoach bus service in Ireland and was stripped of Britain's premier UK rail route in 2012, fell the most in 18 years after halting its dividend to focus on a £615 million rights offer and avert a credit downgrade.

Stock tumbled 30 per cent at the group.

The three-for-two offer of 723 million shares is priced at 85 pence, a 62 per cent discount to the 223.80 pence closing price last Friday.

FirstGroup, whose chairman Martin Gilbert is to leave after 17 years on the board, has been monitoring its capital requirements since the British government relieved it of the £5.5-billion London-Scotland rail franchise, citing flaws in the assessment process.

The company said the rights offer would help it retain an investment-grade credit rating, remove balance-sheet constraints and ease spending plans.

"The proceeds of the equity raising will give us the flexibility and capital confidence to focus on the work that needs to be done to create long-term value," chief executive Tim O'Toole said.
– Bloomberg