JOHANNESBURG (Reuters) - Virgin Active and New Look owner Brait (BATJ.J) said it plans to raise up to 5.6 billion rand ($381 million) via a rights issue and other measures to tackle its high debts, roiling the South African investment firm’s shares on Wednesday.
Shares in Brait, the majority owner of gym brand Virgin Active and British clothing group New Look, were down 15.15% to 14 rand by 1403 GMT after it proposed an equity capital raising of between 5.25 billion rand and 5.6 billion rand.
This includes a fully underwritten rights offer of 5.25 billion rand ($357 million) to existing shareholders.
Brait said it had a core portfolio of “distinctive, financially strong and cash generative investments” but these were undervalued due its high debts and concerns over its ability to meet its debt obligations.
The company said its recapitalization plan includes new equity “to reduce debt to a sustainable level” and a partial repurchase of 350 million pounds ($449 million) of its convertible bonds due on Sept. 18, 2020.
This will be funded by the issuance of about 150 million pounds of convertible bonds due in December 2024, and cash.
The equity capital raising will introduce Ethos (EPEJ.J) as a new strategic partner through its investment of 1.350 billion rand and it will also become an adviser to Brait.
Brait said its existing lenders Rand Merchant Bank and Standard Bank (SBKJ.J) have agreed to amend the terms of the Brait Mauritius Limited revolving credit facility (BML RCF) and extend its maturity by three years.
The net proceeds of the equity capital raising will be used to repay the remaining portion of the outstanding bonds at or before their maturity and to partially repay the BML RCF, as well as for general corporate and financing purposes.
Brait’s net debt as of Sept. 30 of 11.965 billion rand includes two large maturities in 2020, namely the 350 million pounds of unsecured outstanding bonds and the Mauritius revolving credit facility maturing on Dec. 6, 2020.
After the recapitalization, Brait said it intends to form a new board and propose it to shareholders. Brait also said it would re-evaluate the costs and efficiencies of its group structure as part of a new strategy.
Reporting by Naledi Mashishi; Editing by Nqobile Dludla and Alexander Smith