JSE-listed construction company Basil Read's shares took a 23.08% tumble on Monday morning, after it released the terms of its proposed R300-million rights offer, which has been significantly discounted.

The proposal includes the issue of 1.36-billion shares at 22c apiece, compared with the closing price of 65c apiece on Friday.

The rights offer is aimed at recapitalising Basil Read's balance sheet to position it for the current environment.

The company cited a number of cash drains on its balance sheet, including provisions on contracts within the roads division and the writedown of goodwill as a result of a decline in earnings of that division, claims recoveries being significantly below expectations, cost overruns, bad debts and penalties.

A few legacy cash-depleting projects over the past years have further negatively impacted on the cash reserves of the company, resulting in cash flow being constrained and Basil Read being unable to meet future cash requirements without recapitalisation.

The first phase of the recapitalisation involved seeking a bridge facility from the Industrial Development Corporation of R150-million. The first tranche of R61-million of the R150-million bridge funding was approved in August last year and drawn down in September.

The second tranche of R89-million was approved in October and the remaining R43-million was drawn down in December to meet existing commitments.

"The IDC bridge loan and the debt standstill agreement provided us with the necessary breathing room and stability to focus on operations, while long-term funding is required to recapitalise the group and provide it with the necessary platform and working capital to carry out our operations efficiently," the company said in a statement.

The group is also undergoing a strategic repositioning, including the rightsizing of overheads for each division; the restructuring of corporate overheads including reducing head office rent; fixing and closing distressed contracts; a renewed focus on resolving claims timeously; investing in and growing the higher-margin businesses in the civils, developments and mining divisions to enable the company to generate more operating cash flow; and selling certain noncore assets to allow Basil Read to reduce balance sheet risk and generate free cash.

The disposals are anticipated to be made during this year.