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National Express announces £360 million rights issue

As expected, National Express has today announced a £360 million rights issue which will be used to shore up the company's balance sheet. This comes in the midst of a very difficult period in the life of National Express which has been forced to give up one of its rail franchises, seen debt top £1 billion and been rebuffed by potential suitors for the business. So is the company finally escaping from past mistakes?

Surprisingly, the company has decided to go ahead with the fundraising without the support of the largest shareholder in the group, i.e. the Cosmen family. However, the fundraising has been underwritten by city institutions, which effectively means that whether or not current shareholders take up their entitlement, there are buyers for the shares and the company will receive the full £360 million it is looking for. But is this enough to see the company back to health?

Part of the reason for the rush in delivering the fundraising is the fact that a £5 million interest penalty awaits the company if debts are not reduced before Christmas. While this is not a perfect reason to announce such a large fundraising, the company has little choice at the moment due to the fact potential suitors have walked away and talks with Stagecoach were terminated because of potential time constraints.

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