Shares in Premier Inn owner Whitbread tumbled 16% today after it said it would seek £1.01 billion in fresh cash from shareholders to help weather the Covid-19 crisis.
The 278-year company said it would offer its owners one new share for every two existing shares in a fully-underwritten rights issue.
The rights issue is aimed at bolstering its balance sheet and boosting investment while other budget-branded competitors struggle with the fallout of the pandemic.
The significant dilution for shareholders implied by the deal pushed its shares down 16% this morning, making it the worst performer in the FTSE 100 blue-chip index on the day. Rival hotel operator IHG also fell by 4%.
The new shares will be offered at 1,500 pence per share, a 37.4% discount to the theoretical ex-rights price (TERP).
With British holidaymakers unable or unwilling to travel abroad, Whitbread has an opportunity to take advantage of a big increase in 'staycations', analysts said.
Whitbread, owner of brands such as Premier Inn, Beefeater, Brewers Fayre and Bar + Block, separately said its full year adjusted pretax profits dropped 8.2% and it had suspended its dividend as part of its cash conservation efforts.
It said its adjusted pretax profit dropped to £358m for the year ended February 27 from £390m a year earlier.
The hospitality sector has been hit hard by the pandemic and is expected to implement strict health guidelines as governments ease lockdowns.
Whitbread, which had a market capitalisation of £3.829 billion as of yesterday's close, expects its hotels and restaurants in the UK to remain closed or operate at low occupancy levels until September.
