The £420m Phaunos Timber fund has issued plans for an emergency equity issue as a fall in timber prices in China creates “material uncertainty over the immediate liquidity requirements of the company and its cash position.”
An announcement by the board of the UK-listed trust sets out plans for an equity injection by a placing of around 5 per cent of the company’s issued share capital.
The board reinforces that the issue, which it says is set to take place in the next few weeks, will be a “one-off event” adding that the plans have been received well during “informal discussion with a number of shareholders”.
“The directors believe that the raising of funds by way of an issue of equity will be successful and it is the opinion of the directors that the company will remain a going concern following a successful equity raise,” it adds.
Concerns over the liquidity of the fund were first raised following “a number of changed circumstances” including a possible final capital call from one of its holding as well as a temporary dividend suspension on a separate holding due to reduced timber prices in China, leading to what the board describes as “material uncertainty over the immediate liquidity requirements of the company and its cash position.”
The board also warns that unless action is taken the trust “may be unable to pay its liabilities as they fall due within the next three to six months.”
“Advanced discussions” are taking place between the company and potential debt providers as an alternative if the issue does not go ahead.