Pushing the limits
As the UK was plunged into its first nationwide lockdown in the final week of March 2020, UK travel concessions business SSP snapped into action, raising £216.25m overnight from equity and circumventing the pre-emption guidelines a week before their eventual relaxation.
The deal, led by Barclays, Goldman Sachs, HSBC and JP Morgan, provided a template for a cascade of other UK companies that prioritised shareholders on capital increases of up to 20% based on a range of forecasts that were based on limited information.
As global travel shut down SSP’s food retail business concentrated in travel hubs, including airports, railways stations and motorway service stations, its revenues were in freefall. Its UK and Continental Europe like-for-like revenues in the week preceding March’s deal were down 80%–85% from a year earlier.
“We didn’t have the luxury of sitting around,” said a person close to the issuer.
Guidelines set out by the UK’s pre-emption group advise listed companies to limit any capital raises that do not prioritise existing shareholders to 5%, or 10% for an acquisition. SSP determined it needed 20% but a rights issue dragged out over several months was not the answer.
It put together a package of accelerated bookbuild along with an up to £112.5m loan from HSBC and NatWest, with the latter a bridge to SSP receiving funds from the UK government’s Covid Corporate Financing Facility announced a few days earlier.
“Its size belies its importance,” said Richard Cormack, co-head of EMEA ECM at Goldman.
SSP’s focus on soft pre-emption, which saw existing shareholders targeted in a wall-crossing exercise and prioritised in allocations, assuaged any concerns and set the standard for UK emergency fundraisings.
Existing shareholders provided all of the top 10 orders and accounted for more than 70% of the deal.
Additionally, the adjacent publication of a meticulous Covid-19 trading update outlining immediate mitigation steps taken by management, financing arrangements and a worst-case scenario, provided investors with as much clarity as was possible given the unprecedented circumstances.
“The scenario work we did was probably used by the next dozen companies as the benchmark for how to communicate with the market around the future shape and scale of the issue in different businesses,” said Tom Johnson, head of EMEA ECM at Barclays.
Robust shareholder support also contributed to premium pricing, which was 6.2% higher than the previous day’s close. Aftermarket performance was robust, with shares rising 23% the following day.
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