Johannesburg - PPC, the listed cement and lime producer, has obtained bank guarantees from a consortium of banks to underwrite its R4 billion rights offer.
The stand-by underwriting agreement follows PPC’s announcement on Friday that it had secured an irrevocable and unconditional liquidity and guarantee facility for a maximum of R2bn in favour of PPC bondholders and further improved the company’s short-term liquidity position.
The R2bn in bridging finance would be effective until the proceeds of the proposed rights issue were received.
The capital raised from the rights issue would largely be used to repay debt funders for a guarantee extended to PPC bondholders, an existing term facility that redeemed a PPC bond in March this year and the redemption of black economic empowerment (BEE) debt that matures in December.
PPC said yesterday that it had mandated a syndicate of banks comprising Standard Bank, Nedbank, Absa and FirstRand division Rand Merchant Bank to lead its proposed rights offer process as joint bookrunners.
Standard Bank was appointed the sole global co-ordinator.
The company added that the joint bookrunners had provided a stand-by underwriting commitment of R4bn related to the proposed rights offer, which in due course and subject to the fulfilment of the conditions precedent would be replaced by a formal underwriting commitment.
Darryll Castle, the chief executive of PPC, said the execution of the irrevocable and unconditional guarantee in favour of noteholders, together with the signing of the standby underwriting agreement, were two major milestones for PPC.
“These pave the way for the company to resolve its capital structure issues effectively and focus its efforts on implementing its strategy going forward,” he said. PPC was planning a capital raising but had to accelerate the raising and increase the quantum of the rights issue when S&P Global Ratings downgraded the group’s credit rating.
Castle said earlier this month that PPC’s board had to extend an offer to bondholders within three days of a downgrade but had to have sufficient funds to redeem the bonds.
He said the bond redemption was very onerous and made PPC accelerate the right issue and make it bigger than previously expected.
PPC said yesterday that it was targeting the posting of a circular to shareholders this week to convene a shareholders’ extraordinary general meeting to approve the necessary resolutions required to implement the proposed rights offer towards the end of next month.
Going concern
The company said a further announcement would be released providing shareholders with the salient dates and times of the extraordinary general meeting and further information related to the proposed rights offer.
PPC’s auditors Deloitte & Touche said in the company’s financial results statement for the six months to March, released about two weeks ago, that it was unable “to draw a conclusion on PPC’s ability to continue as a going concern” because management plans on both the bridging finance facility and capital raise were not sufficiently advanced.
PPC shares gained 7 percent on the JSE yesterday to close trade at R7.59.
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