Shares of SSP Group PLC (LON: SSPG) fell 16.8% after the company’s shareholders voted to approve the £475 million rights issue proposed by the firm on March 17, 2021, at yesterday’s general meeting.
The selloff in SSP Group shares reflects the lower pricing of the rights issue shares, priced at 184p per share, representing a significant dilution for current shareholders. The rights issue will see shareholders receive 12 new shares for every 25 existing shares.
The food service company intends to use the proceeds of the rights issue to strengthen its balance sheet by extending the maturity of its term loans worth £373 million from 15 July 2022 to 15 January 2024.
SSP Group also intends to negotiate further waivers and modifications of the Group’s existing financial covenants. The funds raised could also fund the company’s operations for a significant duration in the worst-case scenario.
The food service company said that it expects the global travel market to recover back to 2019 levels by 2024. Currently, the firm’s revenues are down over 80% compared to pre-pandemic periods as global travel remains restricted.
SSP Group operates foods service outlets in airports and other travel points and has seen its sales suffer significantly after global travel ground to a halt due to the coronavirus restrictions imposed across many countries from March 2020.
The company managed to reduce its operational costs significantly after the pandemic struck, but monthly cash burn remains at £25m to 30m. The company noted that it has 90 new opportunities that it will explore once the travel situation stabilises.
The emergence of new variants of the coronavirus is likely to delay global travel recovery as countries impose new restrictions to curb the pandemic’s third wave.
SSP Group share price.
SSP Group shares fell 16.83% to trade at 326.15p, having dropped from Tuesday’s closing price of 392.15p.
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