Nampak, which has had to implement a turnaround strategy, says favourable terms with lenders have been agreed on, and a rights issue of up to R1 billion on August 31 is planned.
In an update yesterday, the biggest packaging manufacturer on the continent that is struggling to deal with debt of R1.94bn - primarily associated with legacy expansion activities in Angola and Nigeria - said the finance restructuring meant the group was now well placed to hold a rights issue.
Negotiations for a favourable financing package with lenders about the group’s revolving credit facility and term loan facilities, as well as with its US Private Placement Noteholders (USPP), had been successfully concluded, the group said.
SmalltalkDaily Research analyst Anthony Clarke said the easy-to-read, factual and transparent announcement of what was a relatively complex restructuring was positive in that debt had been extended and deferred on favourable terms and the big four banks, who were key lenders, were supportive of the plans.
In addition, the interim CEO Phildon Roux, well known for turning around struggling businesses to profitability, was appointed permanent CEO and some R2.6bn of cost savings had already been identified, while the group had been astute in leaving the full terms of the rights issue until a later date to prevent short selling, said Clarke.
“This is why the share price went up instead of going down which is usual the case when there is a rights issue announcement,” said Clarke. The share price tracked up 0.41% to R210.87 yesterday afternoon on the JSE.
In terms of the refinancing package, proceeds from the rights offer would be used to repay debt.
The refinancing also included a borrowing-base facility of R2.58bn and a revolving credit facility of $10 million to provide flexible working capital financing, secured through Nampak’s debtors book and inventory.
Also, the USPP debt would have to be reduced by $24.6m (R467.8m) after a proportion of rights offer proceeds, within 18 months.
Nampak said it had strong support from the big four South African banks including a commitment to finance Nampak in the long term, underpinned by the turnaround strategy.
On the turnaround strategy, Nampak said that positive progress was being made on numerous transformational workstreams, right-sizing initiatives, and the asset disposal program, with further announcements in due course, as negotiations progressed and binding offers were obtained.
Other initiatives included right-sizing costs and unearthing inefficiencies; revenue growth management; optimised working capital and merging Bevcan/ Divfood.
“The greater cohesion created through the restructuring and focus on its core competencies will ensure that the group can continue to deliver the best solutions for its customers, driving growth in its core categories and increasing its market share,” the group said.
Roux’s appointment as CEO comes into effect from September 2023. He is being supported by the chief financial officer of eight years Glenn Fullerton, the chief restructuring officer Michael Dorn, and a newly appointed executive team.
By 4pm the share price was up 0.43% at R210.90 on the JSE yesterday.
BUSINESS REPORT