Company issues new shares to plug ‘short-term cash shortfall’
Broking group Brightside has raised £6.8m from a share placement to prevent the possibility of breaching a bank covenant linked to its premium finance facility.
Brightside issued 45.6 million new shares at 15p a share to existing investors.
The company said it was at risk of breaching the covenant because of a “short-term cash shortfall”.
Brightside said in a stock exchange announcement: “Despite the strong operational cash profile of the company, the possibility of a breach has arisen due to a short-term cash shortfall following the payment of legacy deferred consideration and advanced commission, and the covenant testing date falling during the company’s seasonally low cash period.”
Following the capital raising, Clydesdale Bank, the provider of Brightside’s premium finance facility, has confirmed that the covenant will not be breached when it is tested on 31 January.
Brightside added: “The directors expect the working capital of the company to increase as the financial year progresses and the positive cash flow from Brightside’s operations is received.
“Longer term, the directors expect to utilise the net proceeds of the placing in the business to increase its working capital and to increase the company’s finance capacity.”