Aerospace and defence group Cobham PLC (LON:COB) has confirmed plans for a rights issue to reduce the risk of breaching its banking covenants.
Cobham said it intended to raise £506.7mln at an issue price of 89p per share, representing a discount of 45.4% to the closing price on May 31 of 163p.
Cobham makes avionics, communication & navigation equipment and antennas for major aircraft manufacturers such as Boeing (NYSE:BA) and Airbus (EPA:AIR).
It said in April that rising debt and a slow start to first quarter 2016 trading meant its net debt to earnings ratio could be around the covenant ratio of 3.5x.
“In light of this, the board is planning to reduce the group's indebtedness through the rights issue, which it believes to be in shareholders' best interests,” it said in Wednesday’s statement.
“Reducing the indebtedness of the group will allow management to focus on bringing its development programmes to production and insulate the group against short-term market headwinds.”
Shares in Cobham increased by 2.4p, or 1.5%, to 165.4p in mid-morning trading in London.