TALLINN - The listed media holding Ekspress Group is bracing for an equity issue in a drive for what analysts have described as sorely needed capital.
The prominent marketing and information company is reportedly facing tough times, with analysts speculating that its current business cash flow is not enough to repay the group's outstanding loan debts 's including 839 million kroons (53.6 million euros) in bank loans taken out in purchasing media company Delfi.
The group's supervisory board has scheduled an unprecedented gathering of shareholders on Dec. 12 to propose an increase in share capital by issuing 1.87 million new shares. The shares will have a face value of 10 kroons, but will be sold with a five kroon premium, and the subscription period will be held between Jan. 6 and Jan. 12 next year.
The planned equity issue, which will present no more than 36 shareholders with an opportunity to increase their stake in the company, will inject an estimated 28 million kroons (1.7 million euros) of capital.
"Since subscription starts only in January, the company probably is hoping that the price of their share will rise higher on the market by that time, making the offer attractive," said Erki Kert, chief analyst at LHV investment brokers.
Kert added that given the present market situation Ekspress Group's equity issue is a clear indicator of a serious need of cash to shoulder the burden of loan repayments.
"We believe that next year will be a difficult one for the company, especially with regard to loan paybacks," said Henri Adams, Kert's co-analyst at LHV said.
Adams added that loan repayments are likely to continue plaguing the company in the New Year, with loan interest having already cost the company 41 million kroons this year 's a fourfold increase year-on-year.
But analysts admit it's not all bad news.
Estonian business daily Aripaev reported that Ekspress Group's majority owner Hans Luik has displayed confidence by investing 100 million kroons (6.3 million euros) over the last nine months and extending short term loans issued by his wholly-owned company HHL Ruhm.
Investment banker Joakim Helenius said that Luik has set an example by not shying away from making private injections despite hard times and that Ekspress Group's current loan repayment woes are simply the result of unfortunate market circumstances.
"It shows that Hans Luik believes in his company," Helenius said.
He added that Ekspress Group took a calculated risk when purchasing Delfi, saying that "in hindsight one can say that the purchase price may have been too high, but noone knew at that time that the situation would become so difficult."
Meanwhile, Luik has defended accusations that the planned equity issue is only aimed at a limited circle of investors, saying that the 36-shareholder limitation is simply the figure reached when the number of shares for sale is divided by the minimum purchase size.
He added that there was no need for a prospectus when the smallest possible subscription was over 50,000 euros.