City Pacific’s shares surged after management announced plans to shed assets to reduce debt, after posting a net loss of $139.5 million for 2008.
The company’s stock rallied 8 per cent to close at 26.5 cents in trading yesterday, after leaping as much as nearly 25 per cent earlier in the day.
The property investor and funds manager’s shares were worth $4.40 last year.
Following the global credit crunch, a review of operations has been undertaken, and an asset realisation program has commenced, a City Pacific statement to the Australian Securities Exchange (ASX) said.
“This will see a significant reduction in both project-specific debt and City Pacific’s corporate banking facility, which will in turn, further strengthen its balance sheet and provide insulation from the continuing adverse market conditions,” the statement said.
The company will also review overhead and operational costs, expected to result in job losses.
Low levels of liquidity in the property and finance sectors have caused City Pacific to incur $186 million in write-offs, while the company pays more interest on its debt.
The company intends to proceed with its plan of bailing out investors in its First Mortgage Fund (FMF), by allowing them to transpose their units into convertible preference shares (CPS).
The CPS are subject to shareholder approval and will be listed on the ASX at $1 per share, but will not be redeemable for almost a decade.
