About Eniro's rights offering
Summary
- Rights offering of approximately SEK 2.5 bn with preferential rights for shareholders in Eniro
- The rights offering is fully committed and underwritten by a combination of major shareholders in Eniro, external guarantors and a consortium of underwriting banks
- The rights offering will significantly strengthen Eniro’s balance sheet and secure continued implementation of its strategy for long term growth
- The rights offering is subject to approval at the Annual General Meeting, which is being rescheduled to May 26, 2009
- Subscription price and offer ratio to be announced on May 25, 2009
Subscription period from June 2 to June 16, 2009
- A press conference will be held today at 10.30 CET at Hotel Anglais, Humlegårdsgatan 23, Stockholm
“I am encouraged by the strong support from our shareholders in pursuing these measures to strengthen our balance sheet. The rights offering, in combination with the previously proposed cancellation of the dividend for 2008, will give Eniro the financial flexibility to implement its strategy for long term growth and cost rationalization, thereby strengthening the company’s position as the leading search company in the Nordic media market”, says Lars Berg, Chairman of the Eniro Board.
Background and rationale
Eniro is in the midst of a gradual transformation from a declining print operation into a growing online business. The pace of this strategic transformation position Eniro amongst the leaders in the industry; illustrated by online revenues, which despite the challenging economic environment, increased organically by 7% in the first quarter of 2009, and contributed 44% of total revenues over the last 12 months (excluding Voice).
The high degree of resilience that Eniro has shown in the recent quarters, in spite of sharp decreases in overall advertising markets, is primarily explained by the services offered by Eniro which fulfill basic and critical marketing needs of small and mid-sized companies in Eniro's markets. Coupled with a diverse customer base, a large sales force and leading market positions, this has enabled Eniro to deliver strong results and cash flow in a challenging market environment.
In November 2008, the company announced that in order to secure continued implementation of its strategy for long term growth, the target for net debt was set at 3.0-3.5 times EBITDA. The company subsequently initiated bank negotiations aimed at amending the terms of the bank debt agreements in order to establish a long term arrangement more suitable for the current economic outlook. Following these discussions, the Board of Directors of Eniro and its management have concluded that a rights offering is a more attractive alternative for the company and its shareholders, as it enables Eniro to reach its desired debt level faster, strengthens the company’s refinancing position and substantially improves the company’s headroom to debt covenants, thereby creating the financial flexibility to secure the implementation of the company’s strategic plan and prepare for a continued challenging economic outlook.
Eniro’s bank debt agreements include covenants on net debt/EBITDA, EBITDA/net interest and cash flow to interest payments and debt amortization. As of March 31, 2009 the company was in compliance with all debt covenants. The bank debt agreements allow Eniro to be in breach of its net debt/EBITDA covenant for one quarter until the end of 2009, if certain conditions are met, without having to renegotiate the terms of the agreements. That right has not yet been utilized. By undertaking the proposed rights offering, the company will reduce net debt by approximately 26% before transaction related costs, and create significant headroom to its debt covenants. The majority of Eniro’s bank loans will mature in August 2012 and the proposed rights offering will also allow Eniro to retain its attractive current loan terms unaltered.