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Tuesday, 29 August 2017

Cleopatra Hospitals files for capital increase to fund hospital acquisition, retire debt

MARKET WATCH- Cleopatra Hospital Group is in the market for a 150-bed hospital. The group filed for a capital increase (pdf) of EGP 700 mn through a fully tradable rights issue at the par value of EGP 0.50 per share and will use the proceeds to ensure that EGP 580 mn are available “to support the acquisition of a hospital of around 150 beds.” Cleopatra Hospital Group says due diligence on the transaction is currently in process. The remaining EGP 120 mn of the capital increase proceeds will be used to retire existing debt given what the company describes as “the high cost of debt in the current interest rate environment.”

Are we the only ones who find it spooky that a major corporation decides to raise equity because it’s less costly than raising debt?

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