PPC is eyeing R1.2bn rights issue capital injection to repay debt
CAPE TOWN – PPC, South Africa's biggest cement maker, plans to raise capital, likely via a R1.2 billion rights issue, to repay and restructure debt locally and in its other African markets, and to refinance after the economic effects of the Covid-19 pandemic.
PPC has been struggling to manage a slump in cement demand in South Africa and an inflow of cheaper Chinese imports even before the government efforts to contain the coronavirus outbreak slowed building projects even further.
And while President Cyril Ramaphosa has proposed infrastructure investment to kickstart the economy, this spending will likely arrive too late for PPC’s debt obligations, and to prevent a further slide in profit.
PPC’s share price fell 3.1 percent to 80 cents yesterday at the same time when the All Share Index was down only 0.23 percent. The share price later closed at 81c.
Last month, PPC said earnings would fall more than 20 percent in the year to March 31, due to property, plant and equipment impairments and other fair value adjustments, credit losses and the negative economic impact of the Covid-19 pandemic.
PPC has not reported financials since its half-year results in November, when it had debt of around R5.1bn.
PPC said yesterday that the capital raised, which according to media speculation was likely to be via a R1.2bn rights issue, would help to reach agreement with lenders for access to unutilised facilities, reset covenants, defer payments and extend renewal dates of banking facilities.
The capital would also be used to reach agreement with Republic of Congo-based PPC Barnett’s lenders, and so relieve PCC of its contingent liabilities.
The intention was also to raise capital in PPC International for its sustainability and to fund capital investments.
The overall intention was for the operations of the group to be sustainably capitalised and be able to operate on a standalone basis across the geographies in which it operates.
Gleacher Shacklock LLP had been appointed as financial adviser on the restructuring, and Anthony Ball was appointed as executive director to lead the project. The aim was for the refinancing project to be complete by March 31, 2021.
South African money manager Value Capital Partners, of which Ball is chairperson, has been building a stake in PPC, becoming the second-largest shareholder.