French rail transport company Alstom is considering a rights issue as part of a package of measures to accelerate deleveraging of €2bn.
Shares fell 37.6% on October 5 after the company said that free cashflow was expected to be negative €500m–€750m for fiscal 2023/24, having previously said it would be significantly positive.
On Wednesday, Alstom said large shareholders are supportive of the plan to reduce net debt by €2bn by March 2025 and complete it swiftly. As well as the rights issue, the company is considering other equity and equity-like options, including refinancing, and further asset disposals, a programme that has already launched with a target of €500m–€1bn. The company said it is flexible on the sizing and sequencing of these options.
Other efforts include growing the margin in the order backlog, ramping up production, improving on-time delivery and reducing inventory and overhead costs. Around 1,500 job cuts have also been mooted from its workforce of 82,000.
In late October, Alstom said it had signed a new liquidity line of €2.25bn with an international bank.
Alstom is also making changes at senior level, with CEO Henri Poupart-Lafarge relinquishing the role of chairman and former Safran CEO Philippe Petitcolin to be proposed as board member then chairman at the next shareholder meeting in June.
On a call with analysts, Poupart-Lafarge went through the various options and said: "And last, if needed, if and when needed, [a] capital increase. I always said that the strength of our balance sheet is of utmost importance, and we need to do whatever it takes to sustain this strong balance sheet and if needed, we'll do a capital increase".
It is clearly not the preferred option and the company will discuss it with shareholders in the coming weeks.
In late October, JP Morgan analysts said that Alstom would need at least €1bn to support its investment-grade rating and that the low Alstom share price would mean any equity raise would likely be highly dilutive.
Moody’s confirmed its Baa3 long-term rating for Alstom in early October while lowering its credit outlook to negative from stable.
Alstom previously €2bn through a rights issue in December 2020 to part-finance its €5.3bn acquisition of Bombardier Transportation and achieved 97.3% take-up and total demand of €3.4bn. Bank of America, Credit Agricole, HSBC and Societe Generale were on the top line, with participation from Goldman Sachs, Natixis, Santander, BBVA, Commerzbank and UniCredit.
Alstom shares initially fell nearly 22% on news of the asset disposals and cuts on Wednesday before pulling back to close down 15% at €12.04.