JSE-listed building materials company PPC reports it is making positive progress against key milestones of its restructuring and refinancing project, which is centred on implementing a sustainable capital structure and improving the investment prospects of the group.
In South Africa, to date, the company notes that all conditions precedent relating to the renewal of short- and long-term facilities with its South African lenders, including the registration of security, have been fulfilled.
PPC says the agreed facilities provide adequate headroom for the South African operations’ ongoing requirements.
In the Democratic Republic of Congo (DRC), PPC says, substantive negotiations are continuing with lenders to implement a sustainable capital structure for PPC Barnet and to remove any recourse to PPC for the provision of deficiency funding to these operations.
The negotiations are being conducted under the terms of a formal standstill agreement, which is effective until March 31, with resolution targeted ahead of this deadline.
Subject to the resolution of its DRC exposure, PPC has committed to an equity capital raise by March 31 to de-gear its South African balance sheet.
While positive progress is being made on the project, PPC says it will be formally engaging with its South African lenders to extend the timing of the capital raise by three months to the end of June, when certainty on the key elements of the restructuring is expected.
In addition, PPC says the process to raise capital in PPC International continues, with expressions of interest received from various parties under consideration.
Further, the structured sales process for PPC Lime is ongoing, the company reports. This is in line with a number of nonbinding offers received at the end of January and shortlisted parties progressing to due diligence. PPC continues to target deal certainty by the end of March.
The need to restructure and refinance is primarily a result of the investment in PPC Barnet in the DRC, the role assumed by PPC in 2014 as a project sponsor and contingent claims against PPC to provide ongoing deficiency funding to PPC Barnet.
The need to refinance has been exacerbated by the economic effects of the Covid-19 pandemic.
The restructuring and refinancing are aimed at reaching agreement with PPC's South African lenders to provide ongoing access to unused facilities, reset covenants, defer payments and extend renewal dates of the general banking facilities to provide greater financial flexibility in the context of the uncertainties of the current trading environment as a result of the Covid-19 pandemic.
PPC is also seeking to reach an arrangement with PPC Barnet's lenders on its capital and interest obligations as a precursor to agreeing a sustainable capital structure for PPC Barnet and relieve PPC of its contingent obligations.
The project further aims to raise capital in PPC International to enable a sustainable capital structure, to fund certain capital investments in the international businesses and support the restructuring claims of PPC Barnet lenders.
While this will likely result in a dilution of PPC interest in PPC International, it is envisaged that PPC International will remain a subsidiary of the group.
PPC’s board is of the view that on implementation of the project the operations of the group will be sustainably capitalised and self-sufficient on a standalone basis across the key geographies in which it operates, and well positioned to pursue their respective growth and shareholder value creation strategies.