News Column

Phaunos Timber Fund Seeks Equity Injection Amid Liquidity Woes

August 5, 2014

Samuel Agini

LONDON (Alliance News) - Phaunos Timber Fund Ltd Tuesday warned of "material uncertainty" over its immediate liquidity requirements and cash position, and said it intends to raise capital through a share placing in order to prevent the situation from exacerbating.

Its shares Tuesday fell by 22.8% to USD0.330.

In a statement, Phaunos said that the uncertainty over its liquidity requirements was due to a number of changed circumstances, including a possible final capital call from Greenwood Tree Farm and a temporary suspension of dividends from Matariki as a result of reduced timber prices in China.

"The board, as advised by Stafford Timberland Ltd [its manager], believes that, without action, the company may be unable to pay its liabilities as they fall due within the next three to six months," the fund said in a statement.

The fund said it is to seek an equity injection through a placing of shares representing 5% of its existing shares in issue, excluding those held in treasury, within the next few weeks. The board and manager intend to participate in the fundraising. Phaunos said that it has already had informal discussions with a number of shareholders, and therefore believes that an equity raise would be successful.

"It is anticipated that the equity injection, when coupled with the ongoing cost reduction programme, should be sufficient to enable the company to move to a cash flow positive position," Phaunos said in a statement.

The fund added that it believes the capital raise will be a one-off event, based on its manager's current revenue forecasts.

In addition, the fund said that it is having advanced discussions with potential debt providers.

"These discussions will continue in order to ensure that alternatives are available in the event that the proposed equity fund-raising does not proceed," the fund said.

It is also targeting a sale of an underlying property in order to strengthen its cash position. This move, the company said, may enable surplus cash to be returned to shareholders. Asset sales are not being relied upon for the company to become cash flow positive, Phaunos said.

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Source: Alliance News

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