South Africa’s biggest cement maker, is considering a rights issue of about R1.25 billion to refinance both its domestic and international operations, according to people familiar with the matter.
The Johannesburg-based company owes lenders including FirstRand’s Rand Merchant Bank, Nedbank Group and Standard Bank Group a combined R750 million by the end of March 2021, said the people, who asked not to be identified as the plans are private. The balance of the funding effort will go toward PPC’s other units across sub-Saharan Africa, including the Democratic Republic of Congo, they said.
The 128-year-old business was struggling to manage a slump in demand for cement in South Africa and an inflow of cheaper Chinese imports even before government efforts to contain the coronavirus outbreak hampered building projects. While President Cyril Ramaphosa has identified privately funded infrastructure projects as key to an economic revival, the plan is at an early stage and is unlikely to affect PPC’s looming debt deadlines.
PPC will consider a rights issue to strengthen the balance sheet but the timing and amount are yet to be determined, the cement maker said in a statement on Thursday. More immediate priorities include a negotiation with South African lenders to defer repayments and provide access to further borrowings, it said. RMB, Nedbank and Standard Bank all declined to comment.
The shares fell after Bloomberg News reported the plans on Wednesday and extended the decline the following day. The stock has lost almost 83% of its value in the past 12 months, valuing the company at R1.3 billion.
PPC confirmed it has hired Gleacher Shacklock LLP as an adviser. The firm is looking to seek more favorable terms for debt in the Democratic Republic of Congo, said the people, and is in talks with international lenders including the International Finance Corp. and the Eastern and Southern African Trade Development Bank, or TDB, they said. Gleacher and the TDB couldn’t immediately be reached for comment, while the IFC declined to comment.
PPC hasn’t reported financial results since its half-year results in November, when it had gross debt of R5.1 billion. The company has since taken advantage of a regulator-granted extension to belatedly release annual figures through March on Aug. 31.
PPC said last month earnings fell more than 20% in that period and that lenders supported its efforts to navigate the crisis.
South African money manager Value Capital Partners has been building a stake in PPC, becoming the second-largest shareholder, and its chairman, Anthony Ball, recently took up an executive director role at the cement maker to help improve its balance sheet.
© 2020 Bloomberg L.P.