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Estia to raise $137m via share offer

AAP logoAAP 11/12/2016 Prashant Mehra

Aged care operator Estia Health has unveiled a $137 million share raising to bolster its finances and changed its chairman as it tries to revive its fortunes.

The company on Monday outlined a one-for-three rights offer at $2.10 a share, with the proceeds to reduce debt.

The offer is at a 21.6 per cent discount to Estia's last closing price of $2.68 on Friday. Its shares are currently in a trading halt pending completion of the institutional part of the share issue.

Estia has been the hardest hit among the listed aged care players after the federal government announced funding cuts earlier this year.

The company in August unexpectedly missed its annual profit and earnings guidance, resulting in a more than 50 per cent slump in its share price and the resignations of its top two executives as well as the exit of founder Peter Arvanitis from the company's board.

In October, Estia then cut its FY17 earnings guidance by as much as 18 per cent, citing low occupancy and higher than projected costs, leading to a further decline in market value.

On Monday, the company said it has finalised a strategic and operational review and will limit its leverage to a range of 1.5 to 1.8 times of EBITDA. The share raising will reduce net debt to $143 million and bring its leverage to within the target range.

It also said chairman Pat Grier will step down on December 31 and will be replaced by current director Gary Weiss.

"Today's announcements put Estia on a fresh footing with a strengthened balance sheet and, along with a new senior management team and corporate structure, provides the company with the ability to boost earnings and restore shareholder value," chief executive Norah Barlow said.

Estia reaffirmed its earnings guidance of $86 to $90 million for the current financial year, but said the board had decided not to pay any interim dividend for the first half.

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