PIK Postpones Share Issue for Land

PIK Group has indefinitely postponed a share issue aimed at financing land acquisitions, which it will fund with other sources, a company spokeswoman said Saturday.

London-listed residential developer PIK earlier said two of its shareholders, who represent the interests of billionaires Kirill Pisarev and Yury Zhukov, planned to sell up to $500 million worth of their shares in PIK to institutional investors.

The shareholders, Forienst Investments and Maritrade Investments, then intended to reinvest half of net proceeds from the sale by subscribing for additional shares in the offering, which was to be approved by the board last Thursday.

But the board has postponed the vote on the issue following receipt of a request from the shareholders, the company said.

PIK Group spokeswoman Natalya Konovalova said the offering was oversubscribed but that investors were bidding for the shares at a discount.

"We have enough cash on the balance and our debt to [earnings before interest, tax, depreciation and amortization] ratio is quite favorable. We can finance the acquisitions with our own funds or attract loans," Konovalova said.

As of Dec. 31, 2007, the company's cash balance was $695 million, compared with $43 million a year earlier.

"As the new share issue is postponed, [Pisarev and Zhukov] are not selling their shares for now," she added.

The company planned to use the proceeds from the new share issue to fund part of a $280 million payment for two land plots and use other sources to fund the remainder of these payments. PIK on Monday announced that it bought around 63 hectares in St. Petersburg. It is also planning to acquire 229 hectares in Izhevsk, the capital of the republic of Udmurtia, where the firm plans to develop a total of 2.8 million square meters of housing.

"We expect the news to put some short-term pressure on the stock, as it might indicate that the company was unsuccessful in its attempts to raise $1 billion in debt to fund its projects," analysts at UniCredit Aton said.

"However, we believe the company has strong fundamentals and should bounce back in the longer term," they said.

Alexei Kryuchkov, an analyst at Alfa Bank, said the news could sour investor sentiment toward the stock as it created uncertainty regarding the future number of shares in the company, which has a market value of $14 billion.

As of January 1, 2008, the property portfolio of PIK Group amounted to 14.2 million square meters of unsold net sellable space, which was valued at $12.3 billion.