Cash call deluge to start again

25th Sep 2009 11:33

The cash call trend firmly kicked off again this week following a short lull.Barratt and Redrow announced rights issues, while Yell said it too is considering issuing shares. Liberty and Songbird announced share placings this week as well.Rumours suggest there will be more to follow, especially in the property and house building sector. Alongside Barratt and Redrow, the likes of Taylor Wimpey, Bovis, Berkeley Group and Bellway have tapped shareholders for funds in the last few months. Persimmon is the only major housebuilder not to have had a cash call.Royal Bank of Scotland this week admitted it is considering 'partial alternatives' to issuing the government with more 'B' shares as part of the toxic asset protection scheme. The alternative is widely rumoured to be a £4bn rights issue.Last week, Lloyds confirmed talks were underway with the Treasury about alternatives to the scheme. A rights issue of around £5bn is one of the options being mooted. Other companies said to be preparing for a cash calls include ITV, the insurance firm Royal SunAlliance and Independent News & Media. Shares in Severn Trent were down this week as investors contemplated a possible rights issue from the water company as suggested in a downgrade by broker Evolution Securities.Rumours of a rights issue at Enterprise Inns refuse to go away despite Credit Suisse saying after a meeting with the management of the group that a rights issue was not being considered.The dash for cash is similar to the trend seen at the start of the year. Money from rights issues alone reached £35bn in the first half of the yearMost of the earlier cash calls were made by companies desperate to strengthen their balance sheets and pay down debt. And now, the rising equity markets have also tempted companies to take the opportunity to raise funds again. But this time it seems a lot of the companies are carrying out cash calls for potential acquisition and expansion opportunities as signs of an economic upturn takes root.It also suggests that share offerings may be the most attractive way to raise cash in the current climate.Companies are finding it difficult and expensive to get credit and therefore equity is proving to be appealing. They are also unwilling to increase debt and gearing, as investors view these more suspiciously now because of the credit crunch.All of which means that the amount of money raised this year through share issues could reach record levels.