Wesfarmers equity raising rolls on

COAL company and retail giant Wesfarmers has launched the retail component of its previously announced shares entitlement offer as part of a plan that could wipe $5 billion of debt from the books.
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Wesfarmers' Curragh operation.

Blair Price

Under the entitlement offer Wesfarmers will issue three new ordinary shares for every seven existing Wesfarmers shares held on January 28, at a price of $13.50.

The mail-out of the necessary forms is expected to be complete by February 3 and the retail entitlement offer will close on February 23.

In a letter to shareholders, Wesfarmers chairman Bob Every confirmed the fully franked full-year dividend is not expected to be greater than $1 per share and added the company had decided to alter its dividend policy for the future in regard to factors including the company’s cash position, debt levels and business and economic conditions.

On the reasons for the equity raising initiatives and dividend changes, Every said the global financial crisis and economic uncertainty had affected businesses in both retail and non-retail sectors, and there had been a tightening of credit and financial lending.

“The equity raising will enable Wesfarmers to reduce its refinancing requirements over the next two calendar years from $6.4 billion to $1.6 billion and has increased its undrawn debt capacity, compared to the position as at Wednesday, 31 December 2008, from approximately $1.2 billion to approximately $2.5 billion,” he said.

In a footnote to the above statement, Wesfarmers said additional working capital and renewable bill facilities of $2.4 billion held with senior relationship banks due for refinance in 2009 and 2010 were expected to be either repaid or rolled over at maturity and were not included in the refinancing requirements.

Wesfarmers shares last traded down over 3% to $15.52.