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Listed companies find funding more and more expensive

News that Premier Foods has agreed to pay £25 million to various city investment banks to push through a £404 million rights issue perfectly reflects the ongoing cost of funding in the city. This is not the first rights issue to attract substantial investment bank fees with investors ever more concerned about the growing risk of taking up the increasing number of rights issues in the UK.

First we saw the banks attempt to tap shareholders for significant funds (only to be bailed out by the government), then we saw the property sector hit investors for billions of pounds and now what was seen as potentially one of the safer havens, i.e. companies in the food sector, are also looking to raise rescue funds. Many of these companies coming to the market for additional funding had taken on substantial debt over the last decade after a spate of takeovers and mergers.

Investor appetite for fundraisings has been low for some time but the ever worsening economic situation together with increased funding requests would appear to have been too much for the vast majority of UK private and corporate investors. If the economy does not improve in the short term we could see a number of well-known names in various UK sectors come under severe pressure.

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