South Africa: PPC lines up banks for rights issue

South African’s largest producer, PPC, has announced that it has come to an agreement with four banks to underwrite its proposed ZAR4bn (US$260m) rights issue, Reuters Africa reports.

The Standard Bank of South Africa Limited, Nedbank Limited, Absa Bank Limited and FirstRand Bank have been appointed to oversee the offer process, with Standard Bank also taking the role of global co-ordinator.

An extraordinary general meeting is expected to be convened on or around 27 July 2016 to approve the rights issue. PPC is facing higher debt servicing costs following a fall in the value of the rand against the dollar and is looking to use the rights issue to reduce its leverage.

At the end of May, Standard and Poor downgraded PPC from A to BB-, dropping the firm’s rating seven notches and taking it out of investment-grade status. A presentation released by PPC earlier this month described the move as a “sudden and severe ratings action” which had disrupted its plans to raise capital in a more “orderly” fashion.

As of the end of March, PPC’s debt stood at ZAR9.2bn (US$600m). The company plans to use the capital raised in the rights issue to repay at least ZAR3bn of this. The issue itself is expected to be completed by September.

Darryll Castle, CEO of PPC, said: “The execution of the irrevocable and unconditional guarantee in favour of Noteholders as well as the signing of the standby underwriting agreement are two major milestones for PPC. These pave the way for the Company to resolve its capital structure issues effectively, and focus its efforts on implementing its strategy going forward.”