Africa-focused Petra Diamonds (LON: PDL) has launched an £18.8-million ($25 million) rights issue as part of a crucial refinancing strategy aimed at keeping the Africa-focused miner afloat during a severe downturn in diamond prices.
The company confirmed it had reached a long-term refinancing agreement that extends its debt maturities by up to four years. As part of the new terms, Petra introduced a “payment in cash or equity” mechanism, allowing it to pay interest on its notes in shares rather than cash. Interest rates on the notes will increase to 10.5%, or 11.5% if payments are made in equity.
The rights issue, which still requires shareholder approval at a special general meeting on November 6, is a key component of Petra’s internal restructuring. The company expects new shares to begin trading by November 7, pending final agreements.
Interim joint CEO Vivek Gadodia called the move the “final leg” of Petra’s refinancing journey, following 18 months of major internal change. He said the plan substantially strengthens Petra’s capital structure and enables management to focus on executing its business strategy.
The company warned that if shareholders reject the resolutions, the refinancing would collapse. In that case, Petra would not receive the expected net proceeds of about $22.4 million and would not have sufficient working capital for the next 12 months.
Petra has struggled to generate cash flow despite previous asset streaming efforts. Net debt rose to $258 million in the third quarter, up from $215 million at the interim stage.
The company’s shares have dropped 39% year-to-date and 47% over the past 12 months. The company, now valued at £37 million, is trading at 19.1p per share.
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Africa-focused Petra Diamonds (LON: PDL) has launched an £18.8-million ($25 million) rights issue as part of a crucial refinancing strategy aimed at keeping the Africa-focused miner afloat during a severe downturn in diamond prices.
The company confirmed it had reached a long-term refinancing agreement that extends its debt maturities by up to four years. As part of the new terms, Petra introduced a “payment in cash or equity” mechanism, allowing it to pay interest on its notes in shares rather than cash. Interest rates on the notes will increase to 10.5%, or 11.5% if payments are made in equity.
The rights issue, which still requires shareholder approval at a special general meeting on November 6, is a key component of Petra’s internal restructuring. The company expects new shares to begin trading by November 7, pending final agreements.
Interim joint CEO Vivek Gadodia called the move the “final leg” of Petra’s refinancing journey, following 18 months of major internal change. He said the plan substantially strengthens Petra’s capital structure and enables management to focus on executing its business strategy.
The company warned that if shareholders reject the resolutions, the refinancing would collapse. In that case, Petra would not receive the expected net proceeds of about $22.4 million and would not have sufficient working capital for the next 12 months.
Market pains
Weighed down by weak demand, economic uncertainty and the rise of lab-grown gems, diamonds miners have cut costs, halted operations and restructured their business.
Petra has struggled to generate cash flow despite previous asset streaming efforts. Net debt rose to $258 million in the third quarter, up from $215 million at the interim stage.
The company’s shares have dropped 39% year-to-date and 47% over the past 12 months. The company, now valued at £37 million, is trading at 19.1p per share.