April 19, 2018 / 10:39 PM / 3 months ago

UPDATE 2-Shares in NZ's Fletcher Building rise 3 pct as trading halt lifted

* Fletcher shares rise 3.5 pct after trading halt lifts

* Institutional offer raises NZ $515 mln

* Capital raise part of re-set to deal with cost blowouts (Adds investor comment)

By Charlotte Greenfield

WELLINGTON, April 20 (Reuters) - Shares in New Zealand’s Fletcher Building rose as much as 3.5 percent on Friday after a three-day trading halt to allow the company to carry out a capital raise.

The shares climbed to NZ$6.21 after the New Zealand stock market opened.

The rise was the first market reaction to Fletcher Building’s announcement on Tuesday that it would raise NZ$750 million ($545.1 million) in capital and create a banking facility of NZ$500 million as it seeks to address huge cost overruns in its commercial building unit.

The decision was part of a strategy shift at New Zealand’s largest builder after cost blowouts left the firm in breach of some of its financial covenants and forced it to renegotiate those agreements with lenders.

Its institutional offer had increased to about NZ$515 million and its retail entitlement offer would open on Monday and run until May 11, the company said in a release to the stock exchange on Friday.

“It went well, the demand was pretty strong from institutions ... but you would expect that when there’s such a big discount,” said Brian Gaynor, head of Auckland-based Milford Asset Management which owns Fletcher shares and participated in the capital raise.

The NZ$4.80 issue price had been discounted just over 23 percent from the previous closing price.

Fletcher’s shares have been struggling in recent months, falling almost 40 percent since the start of 2017 as commercial unit losses mounted.

“The last year and a half have been pretty negative for the company and yes it’s a good move (today) but there’s still a long way to go,” Gaynor added.

Fletcher’s chief executive said on Tuesday that he was confident the firm would be able to reach agreement with its U.S. lenders by the end of May and its capital raise would help that process.

The company also intends to sell its Formica and steel roofing tiles business in a move to focus on its core Australian and New Zealand operations, a move welcomed by investors.

The share price was still a little below the six-week peak of $6.37 hit last week on takeover speculation. An Australian newspaper had reported that conglomerate Wesfarmers had acquired a 3 percent to 4 percent stake in the builder. Fletcher’s CEO said that was not the case in his market update on Tuesday.

$1 = 1.3759 New Zealand dollars Reporting by Charlotte Greenfield; Editing by Peter Cooney and Stephen Coates

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