DUTCH PLASTIC pipe maker Wavin said yesterday it is considering raising capital, as it may break a debt covenant and does not expect a swift recovery in the construction market. This caused its shares to fall. Wavin said the potential capital increase to strengthen its balance sheet was part of a capital structure review, which also would look at “increasing flexibility under its debt facility”.
Shares in Wavin hit a low of €2.10 and were down 23.5 per cent at €2.21 at the close, giving it a market value of about €175 million. The Amsterdam midcap index was down 0.9 per cent.
Wavin’s leverage ratio may exceed the maximum level at the next debt covenant testing date on June 30th due to “the extremely challenging trading environment”, said Wavin.
Wavin, which was listed at €11 per share in 2006 by private equity firms AlpInvest Partners and CVC Capital Partners, had a net debt of €461 million at the end of 2008 and a leverage ratio of 2.8.
Under its debt covenant, Wavin is allowed to have a leverage ratio, which measures net debt against operating profit (ebitda), of 4.0, the company said in February.
“We expect the company to clearly exceed its covenants mid-2009. Based on these estimates, we consider a share issue of around €150 million to €250 million as a possible scenario,” Petercam analyst Bart van den Wijngaard said in a note.
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