Meggitt Considers Up to $600 Million Equity Offering

(Bloomberg) -- Meggitt Plc is considering selling as much as $600 million of new stock as it prepares for another wave of the coronavirus outbreak that’s hobbled its planemaker clients, according to people familiar with the matter.

The U.K. engineering group is working with advisers to review equity and debt funding options, according to the people, who asked not to be identified because the information is private. One measure under consideration is a share sale equal to as much as 20% of the company’s issued capital, they said.

An offering could be announced as early as this month, the people said. No final decisions have been made, and Coventry, England-based Meggitt may also choose not to proceed with a transaction, they said.

Meggitt said in a statement Thursday that it continues to review actions to mitigate any further downturn in the industry. It said liquidity remains strong, with headroom of 856 million pounds ($1.1 billion) at the end of June and eligibility to access Britain’s Covid Corporate Financing Facility if required.

The company makes components for an aerospace industry that’s been hit hard by the pandemic. Airlines have seen revenue evaporate amid restrictions on global travel, and a number of Meggitt’s clients, including Boeing Co., Rolls-Royce Holdings Plc and Honeywell International Inc., have sought additional funding to shore up their balance sheets.

Jefferies International analyst Sandy Morris said in a note that an equity raise may be the most likely option for the company, “designed primarily to enable Meggitt to seize opportunities more than to repair the balance sheet.”

Shares Slump

The stock traded 6.1% lower at 277.30 pence as of 1:54 p.m. in London, extending its decline this year to 58% and giving a market value of 2.16 billion pounds. The benchmark FTSE 250 index has slipped 20% over the period.

Meggitt has already pulled a planned dividend. In July, the company said it aimed to cut cash outflows by around 400 million to 450 million pounds this year. It also reported “good progress” in paring costs to underpin liquidity. According to the most recent statement it had about 1.7 billion pounds of committed facilities in place at the end of June.

U.K.-listed companies have been given extra leeway to raise larger amounts of new equity amid the downturn. The country’s financial standard-setters recommended in April that shareholders support companies that want to sell new stock equal to as much as 20% of their issued capital -- double the usual ceiling.

Firms including Informa Plc, Compass Group Plc and Asos Plc have sold about 14.4 billion pounds in additional equity since then, according to data compiled by Bloomberg, a more than threefold increase from the same period in 2019. The looser rules on share sales are set to expire at the end of September unless they’re extended.

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