Ocado is to raise £35.8m in a placing to fund expansion and extend its debt facilities after speculation mounted it was likely to breach its banking covenants.
The etailer has extended a £100m capital expenditure facility by 18 months to July 2015 with existing lenders Barclays, HSBC and Lloyds. Ocado appointed advisory group Ondra Partners to aid talks with lenders.
The company said it had received offers from existing shareholders to issue 55.9 million new shares, the equivalent of 9.99% of the company’s existing issued share capital.
The move comes after speculation at the weekend that Ocado was to breach its banking agreements as it looks to fund expansion including a new customer fulfilment centre in Warwickshire and a larger non-food business.
Ocado chief executive Tim Steiner said: “We are delighted that Ocado has achieved such strong endorsement from both its institutional and other shareholders and its lenders who support our confidence in our business model and growth prospects.”
The retailer said sales growth had accelerated as the quarter progressed. Total sales increased 11% over the 14 weeks to November 11 and were up 13.7% in the final six weeks of the period.
Panmure Gordon analyst and long-term Ocado critic Philip Dorgan said in a note entitled ‘Ocado: a lifeline’: “Ocado now has the funds to survive for some time. This news, together with the short position, should see the shares rebound strongly. However, that does not mean that the model is suddenly a good one.”
Shore Capital analyst Clive Black said: “It’s not a placing for expansion, it’s a placing to keep the wolves from the door.”