PPC plans US$132 million loan facility ahead of capital raise

Bloomberg

PPC Ltd is in the final stages of negotiating a 2 billion rand (SU$132 million) bridging guarantee facility, seeking to shore up its balance sheet after a credit-rating cut and warnings of a possible liquidity squeeze.
South Africa’s biggest listed cement maker is also working on a plan to raise 3 billion rand to 4 billion rand and expects to complete the process by September, Chief Executive Officer Darryll Castle said. A syndicate of banks, made up of the Standard Bank Group Ltd, Nedbank Ltd, Absa Bank Ltd and FirstRand Ltd’s Rand Merchant Bank, has been mandated to assist with the capital raising, the Johannesburg-based company said in a statement.
PPC is being forced to raise funds after S&P cut its credit rating to below investment grade amid rising debt due to investment in new African projects combined with a difficult trading environment in South Africa. As a result, holders of PPC’s 1.75 billion rand of domestic medium-term notes can choose to redeem the securities and interest this month.
The bridging facility will be used to settle the outstanding note obligations and provide the company with funding ahead of the capital raise, PPC said.While the company still has some conditions to meet on the bridging guarantee, “we think it’s likely we’ll meet those,” Castle said. “I think we’ve weathered that storm.”
PPC has plants under development in the Democratic Republic of Congo, Zimbabwe and Ethiopia to expand outside its home market, where cement-makers are battling increased competition and slowing economic growth.
The bridging facility and size of the capital raising was necessitated by the “timing and severity” of S&P’s downgrade, Castle said. While the outlook in South Africa was more positive when the company started its expansion, its debt was expected to rise as it builds and starts up the new plants, he said.
‘‘The company wouldn’t have been at massive risk,” he said. “We were on top of the situation and the company would have dealt with it in an orderly way.”
PPC shares fell as much as 4.6 percent to 9.25 rand, which would be the lowest closing price in 13 years, and traded 2 percent lower at 10:09 a.m. in Johannesburg. The stock has dropped 38 percent this year, the worst performer on the FTSE/JSE Africa All-Share Index. PPC’s net income rose 35 percent to 369 million rand in the six months through March, while revenue fell 1 percent to 4.5 billion rand.
Because work on the bridging guarantee and capital raising hasn’t been completed, the company’s auditor, Deloitte & Touche, wasn’t able to sign off on its status as a going concern, according to the statement.