JSE-listed automotive components manufacturer Metair has refinanced the R3.3-billion debt package of its remaining South African subsidiaries to extend the term of the debt package to five years.

This enables the repayment profile to match the expected earnings growth and cash flow, including the elevated capital expenditure planned for the financial year ending December 31, 2026, that will cater for a key customer model changeover.

A primary objective of the refinance was to address the maturity of the R1.6-billion subordinated loan that is part of the South African subsidiaries' facility, which was due and payable by June 30, 2027.

This facility has now been converted into a conventional senior term loan that is repayable over five years, which enhances the sustainability of Metair's capital structure.

The current security package remains unchanged, with all remaining South African subsidiaries' assets and cash flows being provided as security for the debt facilities.

Further, as part of the refinance, the interest rates and covenants have been renegotiated, and the reference rate has transitioned to the South African Overnight Index Average, in line with prevailing market convention.

Additionally, the cumulative earnings before interest, taxes, depreciation and amortisation (Ebitda) performance hurdle has been removed from the revised debt structure.

Under the previous financing arrangement, Metair was required to meet cumulative quarterly Ebitda targets, failing which it would have been obliged to pursue remedial actions, including a potential equity raise and/or asset disposals, among others, it says.

This requirement has been eliminated under the revised structure, thereby providing the company with enhanced operational flexibility and reducing the risk of forced capital actions.

The working capital facility of R600-million, including R75-million that has been ring-fenced for automotive component manufacturer Smiths Manufacturing, remains unchanged, but will be subject to review during third quarter of the 2026 financial year, the company adds.

The refinance represents a significant milestone in strengthening Metair's capital structure and positioning Metair to execute on its strategic and operational priorities over the medium term.

Metair approved the refinancing together with its principal lender financial services firm Standard Bank.