LAST week's placing by speciality baked goods company Aryzta demonstrates that the banks are taking a tough line with even the best companies.
Extra debt is now firmly off the agenda -- for even the financially strongest firms.
On Wednesday, Aryzta announced that it had raised €144m from a placing of 4.25 million new shares. The placing will increase the number of Aryzta shares by about 5 per cent.
So why did Aryzta feel the need for such a relatively minor share placing?
It certainly helped that in the days prior to the placing, the Aryzta share price was trading at a 52-week high.
However, the main reason for the placing was almost certainly the more robust attitude that banks everywhere -- and not just in Ireland -- are taking with heavily indebted companies.
As a result of the placing, Aryzta's net debt will fall to just over €800m, just two times EBITDA (earnings before interest, taxation, depreciation and amortisation) while its interest bill will now be covered eight times by EBITDA. Just the sort of numbers to keep the bankers happy.
Sunday Indo Business