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Motor retailer Pendragon has announced plans to raise more than £75m through a discounted rights issue to reduce its debt. The Nottingham-based company said it would also extend its borrowing facilities until June 2014. The company's chairman described the move as "an important step in the evolution of Pendragon".

At December 31, 2010, the company's net debt stood at £325.5m.

The rights issue will be placed to raise gross proceeds of £75.2m, about £70.8m net of expenses.

Shares are being issued at a discounted rate, said the company this morning, at a price of 10 pence per share. This represents a discount of 54 per cent on yesterday's (13 July) closing price.

Pendragon, whose Stratstone dealerships sell brands including Maserati and Mercedes-Benz, said the proceeds of the rights issue will be used to improve its level of long-term debt.

Borrowing facilities will also be extended to June 2014 under new terms, said Pendragon. The company added that "a more robust capital structure will enable the group to continue to maintain investment in the profitable growth of the business".

Mike Davies, chairman of Pendragon, said: "Today's announcement marks an important step in the evolution of Pendragon. These proposals recapitalise the group, providing it with greater strength and flexibility. We are now better placed to pursue our clear strategy and implement our operational initiatives, which we believe will create further value for shareholders.

"We are pleased to see the encouraging performance of the company in 2010 has continued into the first five months of 2011, despite a challenging economic environment. Overall, Pendragon is performing in line with the board's expectations for the full year."

Pendragon added that trading was currently in line with expectations.

Rothschild is acting as joint financial adviser and joint sponsor to Pendragon with respect to the rights issue. RBS Hoare Govett is acting as joint financial adviser, joint sponsor, joint bookrunner, joint underwriter and joint corporate broker.

Barclays Capital is acting as joint underwriter and joint bookrunner while Arden Partners is acting as co-bookrunner, joint underwriter and joint corporate broker.