Why the Mosaic Brands (ASX:MOZ) share price is shooting 16% higher

It has been a good day for Mosaic Brands…

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The Mosaic Brands Ltd (ASX: MOZ) share price has been a very strong performer on Tuesday.

In morning trade, the retailer’s shares are up 16.5% to 63.5 cents.

Why is the Mosaic Brands share price shooting higher?

Investors have been bidding the Mosaic Brands share price higher today after it secured its future via an underwritten capital raising.

This morning the company announced an underwritten $32 million capital raising via the issue of convertible notes. This comprises a $10 million strategic placement of notes to Danfin Pty Ltd and a $22 million 1 for 4.39 pro-rata non-renounceable entitlement offer of notes to eligible shareholders.

The aforementioned notes will be secured by a second-ranking security behind the existing Australia and New Zealand Banking GrpLtd (ASX: ANZ) facility. Positively, the release advises that ANZ has provided consent to the issue of the notes.

Why is the company raising funds?

Mosaic Brands is raising funds for general working capital purposes and to provide the business with additional balance sheet support until COVID-19 related lockdown measures are eased and stores re-open for trade.

Following the completion of the capital raising, Mosaic Brands expects to be well funded through the current period of disrupted trading. This is based on conservative assumptions around lockdown easing measures and the timing of stores re-opening.

In addition, Mosaic Brands intends to exercise its option for the remaining shares in Ezibuy during September. Payment terms for the $11 million acquisition consideration are proposed to be extended from 31 December 2021 to provide additional balance sheet flexibility. Mosaic Brands would have up to 30 June 2022 to settle the exercise price.

Mosaic Brands notes that it will have pro forma cash of approximately $88.1 million post completion of the offers.

The Mosaic Brands share price is down 23% in 2021 despite today’s strong gain.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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