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Swiss steelmaker drops after flagging lower FY'19 profit, capital raise

Swiss steelmaker Schmolz + Bickenbach AG plans a capital increase of CHF189 million to CHF350 million amid what it called a "steel crisis."

The company said separately that its 2019 adjusted EBITDA would be lower than €70 million. It reported targeting €70 million to €100 million in adjusted EBITDA for the full year in September.

"Due to the further increase in political and economic uncertainties and the seasonal decline in demand towards the end of the year, which is customary, the company is refraining from issuing a more accurate forecast," Schmolz + Bickenbach said.

Shares were down almost 14.5% by trading close on the SIX Swiss Stock Exchange following the Oct. 23 announcements.

The company said it needs to strengthen its equity due to weak markets, particularly the car industry. The new shares will be priced between 15 and 30 centimes each.

The transaction is subject to shareholder approval during an extraordinary general meeting on Dec. 2.

The company said that major shareholder Martin Haefner, through his BigPoint Holding AG, pledged up to CHF325 million in the offering, as long as his company stake will increase to at least 37.5%.

Haefner's proposed stake increase is subject to certain conditions, such as the security of a debt financing, the grant of a restructuring exemption from submitting a mandatory takeover offer, and the election of two BigPoint nominees to the Schmolz + Bickenbach board.

In connection with the debt financing, the company said that it agreed with its syndicate banks to temporarily suspend their financial covenants for the third and fourth quarters as it negotiates a long-term financing with the banks.