Technology solutions group EOH says that with the turnaround of its compliance, governance and risk management largely complete, and in the context of the significant improvement in its financial performance, the company is focusing on optimising its capital structure and positioning for future growth by proceeding with an equity capital raise of up to R600-million.

This follows the company reporting positive financial results in October, which it says reflects a major milestone in the successful execution of its turnaround strategy and illustrates the significant progress made in addressing historical compliance, governance and risk failings.

EOH says that, notwithstanding significant progress to date, its deleveraging and liquidity objectives remain incomplete, with the company continuing to be burdened by its debt commitments and interest obligations.

This necessitated the renegotiation of its debt funding package with its lender group, which was concluded on April 1. The terms of the refinancing agreements with lenders require EOH to undertake a capital raise to repay a significant portion of the outstanding bridge facility.

The bridge facility is repayable by December 2023.

EOH has resolved to put in place the necessary measures to be able to proceed with its proposed capital raise, comprising a renounceable rights offer of up to R500-million and a specific issue of ordinary shares at the rights offer price for cash of R100-million to Lebashe, to raise a total of R600-million.

The net proceeds of the capital raise will enable the company to repay about R563-million of its bridge facility (of which R728-million is currently outstanding) and thereby rightsize the capital structure.

The remaining balance of the bridge facility will be repaid from the proceeds of smaller asset disposals, as well as a refinancing of the balance with one or more of the lenders.

It will also enable optimisation of the company’s balance sheet and ensure the group has sufficient working capital in the short to medium term to pursue its strategy.

EOH says that rightsizing the capital structure will allow it to improve earnings and ultimately create value for shareholders.

To give effect to the capital raise, the company requires its shareholders to approve the increase of the authorised ordinary share capital; the consequential amendments to the memorandum of incorporation required by such increase in ordinary share capital; and the allotment and issue of ordinary shares for the purpose of the rights offer and specific issue.