Swiss-Irish bakery company Aryzta will go ahead with a €790 million ($898 million) capital hike after its shareholders on Thursday narrowly approved the plan.
The embattled company, which makes bread for McDonald's burgers, overcame opposition from its largest shareholder, Cobas Asset Management, to win support for the plan at its annual general meeting in Zurich.
In a close vote, shareholders with 52.88% of the voting rights backed the proposal to issue 900 million new shares, with 46.98% against.
"Hugely Relieved"
Aryzta's chairman Gary McGann said he was "hugely relieved" by the result, which will mean existing shareholders will be offered the right to buy 10 new shares for every share they hold.
"It's an enormous step forward," he said after the AGM, saying Aryzta could now move to "running the business rather than running its balance sheet".
He said customers had been concerned about Aryzta's debt levels, forcing the company's chief executive and chief financial officer to meet them to talk about debt rather than its products which include doughnuts, artisan bread and cookies.
"The capital increase together with underlying business stability will go a long way to addressing the important issue of consumer confidence in the business," McGann said.
At the end of July, the company's senior debt stood at five times its earnings before interest, tax, depreciation and amortisation, a situation it described as "unsustainable."
"Unduly Grim Picture"
Cobas, which holds a 14.7% stake in Aryzta, said the company had painted a "an unduly grim picture" of its financial situation to ram through the capital hike.
Spain's Cobas favoured a €400 million euro capital increase and the sale of non-core assets it said could raise a further €250 million euros.
Aryzta, which also makes breads under the Cuisine de France and Otis Spunkmeyer brands, has suffered a torrid few years after it went on an acquisition spree which loaded it up with debt.
Revenue fell 12% last year while it reported a net loss of 470 million euros, weighed down by writedowns and financing costs.
Its operating business also struggled after being hit by higher raw material, distribution and wage costs in North America.
Francesco Garcia Parames, founder and chief executive of Cobas, said he opposed the capital raising, saying it watered down massively the stakes of current investors.
Cobas said it would consider "additional measures" after it lost the vote.
"We accept the decision, but will consider what additional measures are in the best interest of the company," Cobas said in a statement after the event.
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