Private equity company Brait, partly owned by well known South African businessman Christo Wiese, saw its price plunge over 16% on the JSE yesterday after it announced recapitalisation plans that included a R1.5 billion rights issue.
Brait’s share price traded at 96 cents yesterday afternoon on the JSE. Its investments includes 67% of international fitness group Virgin Active, 18% of UK fashion retailer New Look and 38% of local food producer Premier, which listed separately in March last year. Brait’s share price has fallen steadily, by over 70% over the past 12 months.
Independent market analyst Ryk de Klerk said that in general, as he had not looked at Brait, it was not a good time to announce a rights issue because there was little investor appetite for capital issues. However, much depended on the valuation of the shares, and reasons for the rights issue, and it may even be an opportunity for major shareholders to increase their equity stakes, he added.
Brait said that it needed more time to achieve its aim to monetise its assets and optimise the return of capital to shareholders due to the unforeseen negative effects of COVID on its investments, Virgin Active and New Look, in particular.
The maturity of Brait's bonds in December 2024, required a recapitalisation of the group's balance sheet, so that there would be enough flexibility to optimise the exit window for the assets and to avoid being forced into expedient sales of Brait's three remaining assets, when market conditions are not conducive to value maximisation for shareholders.
In March, the group said it was exploring options with stakeholders about options to extend the December 2024 maturities for the company's 150 million pound convertible bonds, and the R3bn exchangeable bonds issued by its wholly owned subsidiary, Brait Investment Holdings.
Brait’s board said yesterday that their recapitalisation plan had been approved. It included the 3-year extensions of the maturities of the bonds to December 2027, and repayment adjustments, with the convertible bonds to be partially repaid by R150m and the exchangeable bonds to be partially repaid with R750m.
Also in the plan was a fully underwritten equity capital raise of up to R1.5bn, with the proceeds retained for general working capital purposes, potential investment in existing portfolio companies or repayment of Brait’s group debt.
In addition, Brait Mauritius’ revolving credit facility was committed to March 2028, with the facility limit increased to R1bn from R600m.
Irrevocable commitments had been received from 80% of the holders of convertible bonds, 73% of the holders of exchangeable bonds, and 43% of Brait ordinary shareholders, for the recapitalisation plan.
The company said that the resultant, combined R900m reduction of the nominal value of the bonds would reduce debt, whilst the rights offer would strengthen the balance sheet and provide capital for general working capital purposes, potential portfolio company investments and liquidity to repay debt.
Post the Recapitalisation, net debt is expected to reduce by R2.4 billion to R3.7bn from R6.1bn.
The company said the lower nominal values of the bonds mitigated an increase in the coupon rates, resulting in a negligible increase in cash interest expense for the company.
BUSINESS REPORT