A slew of listed companies is expected to join the present "dash for cash" from investors to deal with debt levels while they are still able to raise funds.
More than $1.1 billion has been raised during the past fortnight by five companies, and similar levels of capital-rasing are expected in the months ahead.
ABN Amro Craigs broker Peter McIntyre said companies with higher debt-to-equity ratios were looking to raise cash now, mainly through ordinary share placements to institutional investors or existing shareholders.
"Property companies especially are seeing their assets dwindling in value, which increases their debt ratios.
There has been a dash for cash and will be several more yet," Mr McIntyre said yesterday.
The driving force behind the capital-raising is to underpin balance sheets now and prepare to pay down debt in order not to break banking covenants in the future, which could make borrowing more difficult and expensive.
With the boost from extra cash in hand, the capital-raising companies' debt-to-equity ratios are all falling in percentage terms, such as Freightways, whose ratio fell from 72% to just over 50% after it completed raising $45 million this week, Mr McIntyre said.
"Ideally, companies are looking for ratios around 35% to 40%," he said.
Mr McIntyre believed the companies most likely to go for capital-raising, which all had high debt levels, could include casino operator Sky City Entertainment, whiteware manufacturer Fisher & Paykel Appliances, winemaker Delegats, healthcare organisation Abano, auto-parts maker Hellaby Holdings, rubberwear manufacturer Skellerup, carpet manufacturer Cavalier, infrastructure company Vector and rural servicing company PGG Wrightson.
"Some of these companies are predicting that their trading conditions could deteriorate," Mr McIntyre said.
Forsyth Barr Broker Tony Conroy said Fisher & Paykel Appliances was "fairly likely" to join any list of companies set on capital-raising in the near future; however, capital-raising through new share issues was difficult to pick as companies dealt with financing arrangements differently.
"Fletcher Building has been proactively seeking capital from institutional investors and shareholders, before they end up in competition with other companies in the same sector," Mr Conroy said.
Mr McIntyre said while debt ratios, debt repayment and banking covenants were foremost in companies' minds, the capital-raising could also lead to the takeover of ailing companies struggling in the recessionary times.
"Some companies may have the [financial] flexibility to take advantage of the current economic situation and depressed asset prices.
There could well be more corporate activity during the next six to 12 months," he said.
Mr McIntyre said an example of increasing banking pressure was seen last month when cash-strapped and debt-laden resin manufacturer Nuplex was forced into a $132 million share issue, which was "highly dilutional" to existing shareholders.
While banks were reassessing their own risk exposure and "stepping away" from lending, there was now "some onus going back on shareholders to maintain the financial viability" of listed companies, he said.
During the past six to 12 months, the four major Australian banks had raised more than $A4 billion ($NZ4.9 billion) in placements, Mr McIntyre said.
