Specialist buy-to-let lender Paragon has declared it is willing to launch an emergency underwritten rights issue on the back of continued credit crunch concerns.
Through a standby agreement with UBS, Paragon can launch a rights issue up to £280m, until 27 February next year.
The company’s share price has plummeted on this morning’s announcement, falling 44.43% to 113.5p.
In a statement to the stock exchange, the lender confirmed it will not pay a final dividend as a result of the rights issue possibility.
“The current environment, whilst immensely disruptive, is driven by market-wide funding concerns and the actions taken by the group will ensure that the embedded value in the business is protected whilst providing a base for future profitable lending when credit markets recover," Paragon chief executive Nigel Terrington says.
The Paragon statement reads: “The present travails of the credit market coinciding with the expiry of our syndicated credit facilities have created uncertainties over the group's future funding in the near term.”
“Whilst we expect the capital markets to recover during 2008, it is important that we manage our new business generation cautiously to ensure that new originations remain profitable, but also, fundamentally, to protect the embedded value in the current portfolio.”
Paragon’s pre-tax profit climbed 9.9% to £91m in the year to 30 September, from £82.8 million for the corresponding period in 2006.
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