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LONDON (Reuters) - Transport group National Express beat off opposition from its largest investor to win shareholder approval for a 360 million pounds rights issue it needs to cut debt and restructure after losing rail franchises.
National Express said more than two-thirds of shareholders voted in favour of a cash call at an extraordinary meeting on Friday, a move which will allow it to repay some of its 1 billion pound debt pile and avoid breaching loan terms.
Jorge Cosmen, National Express' deputy chairman, raised his family's stake in the company from 18.5 percent to almost 20 percent earlier this week in what analysts said was a last-ditch attempt to vote down the cash call on Friday.
The Cosmens, which dropped their own proposal to buy National Express in September, have been campaigning against the fundraising on the grounds that it was too large. They have accused the company of lacking a strategy after it rebuffed last month's takeover proposal from Stagecoach .
National Express rejected Stagecoach's all-share offer because it feared a deal would not be executed by Christmas, when it faces 5 million pounds in penalty interest payments on its near 1 billion pound debt pile.
Shares in National Express, which have fallen 16 percent in the last three months month, were 1.25 percent down at 332.60 pence by 12:15 p.m., valuing the group at around 515 million pounds.
"You would assume the bulk of the votes against the rights issue came from the Cosmens and the question is what will they do next?," said Arbuthnot analyst Gerald Khoo.
"The rights issue cash will help get the group's debt down but it faces several other challenges going ahead, such as refinancing its debt, finding a new Chief Executive and dealing with trading problems."
RAIL FRANCHISE LOSSES
The government on Thursday ordered National Express to hand back its East Anglia rail franchise in March 2011.
The loss of the franchise comes after National Express was forced to hand back the East Coast main line service having run up large losses on the route.
National Express, which once ran half of Britain's rail network, is expected to increasingly focus on its coach operations.
The bus and rail operator said it would issue around 357 million shares at 105 pence per share -- a 70 percent discount to Thursday's closing price of 336.70 pence -- on a seven-for-three basis, fully underwritten by Merrill Lynch and Morgan Stanley.
The fundraising will allow National Express's lenders to push back the maturity date of its 540 million euro debt facility from September 2010 to March 2011, allowing it to refinance its other 800 million pound credit facility.
Analysts said the Cosmens recent stake-building was designed to show the board it was committed to a long-term role in the business and that they would likely take up the option to buy rather than see its stake diluted to around 6 percent.
The Cosmen family and private equity group CVC Capital Partners approached National Express in September with a 765 million offer worth 500 pence a share, but walked away on October 16 after examining the company's books.
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