New Zealand-based Nuplex Industries has joined the run of companies being forced to raise capital from the market to reduce debt and appease banks worried about high debt levels.
Nuplex said yesterday that it will raise $$NZ110 million to cut debt as part of a deal with its banks.
The deal includes a share placement to institutional investors and a retail offer.
Nuplex shares went into a trading halt in New Zealand pending a bookbuild process and the terms of the rights offer will be announced once it’s completed.
Nuplex last month said first-half net income slumped 76% as the slump at home and offshore cut demand for its resins and other products.
The crash in earnings saw the company’s ratio of earnings to interest costs on its bank debt to breach agreed covenants in agreement with its banks.
The shares have fallen 81% since Nuplex disclosed it was in talks with bankers in its interim profit announcement on February 19.
“The new capital to be raised from the placement and the rights offer will, in the opinion of directors, be sufficient to meet Nuplex’s short and medium-term capital needs in the current economic and trading environment,” the company said yesterday.
The banks have agreed to amend the senior debt cover ratio during the next six months.
Until April 30 the earnings to interest costs measure is waived and in the period from May 1 to June 29 it must be no more than 3.5 times.
Nuplex must have the ratio at 3.0 times by September 30.
The loan agreement requires Nuplex raise new capital and limit annual dividends to 60% of net income. Asset sale proceeds should be applied to reduction of debt.
"The new capital to be raised from the Placement and the Rights Issue will in the opinion of the Directors be sufficient to meet Nuplex’s short and medium term capital needs in the current economic and trading environment," directors said yesterday.
Currently Nuplex says it has $A350 million of bank debt from the likes of the Commonwealth, HSBC, Citibank and Westpac.
"Nuplex currently has in place bank debt facilities totalling A$350m. Following receipt of the proceeds from the planned capital raising, these facilities will be drawn to approximately A$240m.
“Nuplex does not anticipate any issues in repaying the amount due to Citibank in November 2009 (subject to completion of the planned capital raising)."
Nuplex shares ended at 75.5c a share ahead of the trading halt.
