Shipbuilder Austal has announced a deeply discounted, highly dilutive $85 million rights issue to recapitalise its business as it looks to deliver on its $2.3 billion order book.
Existing shareholders will be offered nine new shares priced at 50 cents for every ten existing shares they hold, representing a discount of more than 50 per cent on the company's last traded price.
The underwritten, institutional component is expected to raise $61 million while the retail component will raise a maximum $25 million.
Austal said the funds raise would be used to "reduce indebtedness and strengthen Austal's balance sheet".
Austal said the raising would reduce its net debt to $130 million, giving the company a 26.7 per cent gearing ratio.
The company also said it had renegotiated its three-year banking facility, which it said would enhance its financial flexibility and extend its debt maturity profile.
Austal chief executive Andrew Bellamy said the capital raising and new banking facilities would allow the company to continue to pursue its strategic initiatives and position the company for sustained growth.
"Given the outlook for the business at present the board felt it was prudent to recapitalise the balance sheet to ensure the company was best positioned to deliver on its order book and outlook," he said.
"As a result, the board elected to raise equity and reduce the gearing levels, and at the same time renegotiate the debt facilities, to ensure appropriate maturity terms and interest rates are in place.
"Austal now believes it is appropriately capitalised to deliver on the company's strategy."
Austal issued full-year profit guidance of between $23-$26 million, up from $11 million last financial year.
Full-year EBITDA was expected to come in between $65-$71 million.
"The growth is predominately underpinned by profitability improvement initiatives across the business and the benefits of the recently established Philippines shipyard operations," Austal said.
"Austal continues to enjoy a strong positive outlook underpinned by a record order book of $2.3 billion which is expected to secure revenues through to 2016," the company said.
The institutional component of the rights issue will be underwritten by JP Morgans and Macquarie.
Austal shares, which have been in suspension for the past week, last traded at $1.02.