South Africa's Pick & Pay said on Thursday it plans a rights issue to raise up to R4 billion ($209.9 million) to shore up short-term liquidity as the supermarket group's debt soars. announced that it plans to list discount grocery chain Boxer.
The company also warned that it could end up in a comprehensive loss for the year, sending its shares plummeting more than 17%, the biggest single-day drop on record.
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New chief executive Sean Summers has struggled for more than a decade to lose market share to big rivals such as Shoprite in a promotion-heavy retail environment and an economy constrained by high interest rates, inflation and energy costs. He is tasked with rebuilding the company, which has been in decline.
Announcing a two-stage recapitalization plan four months after Summers' appointment, the company said the rights issue would be made to existing shareholders and Boxer would be listed on the Johannesburg Stock Exchange.
Rights issuance will take place in mid-2024, with Boxer expected to be listed towards the end of the year. The group said it intends to maintain a majority stake in Boxer.
“The Board of Directors believes that the two-stage recapitalization plan will not only stabilize the Group's balance sheet, strengthen the Group's liquidity and provide adequate capital funding for long-term sustainable growth. We believe this is the best course of action which is also important to unlock shareholder value,” the retailer said.
The Ackerman family, which founded Pick & Pay and is its controlling shareholder, has expressed support in principle for the proposed plan.
The group also saw its net debt fall from R3.8 billion to R7.2 billion as of January 21, due to disappointing trading performance at its core Pick & Pay supermarkets, stock increases and strategic investments in growth plans. He said there had been a significant increase to Rand. August 27th.
The retailer said it has approached major lenders under long-term syndicated loans and bilateral loan facilities to ensure continued compliance with the group's long-term debt covenants.
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The lender waived all covenants regarding the facility on February 25 and agreed to amend the covenants by August 31, 2024.
“These exemptions have provided the group with sufficient time and flexibility to strategically assess the group's cog position and advance the most appropriate course of action to revise its capital structure.” Pei said.
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