PETRA Diamonds on Friday announced it had agreed with noteholders and lenders to refinance the company – an emergency measure that will also involve a $25m rights issue. Shares in the firm rebounded 44%.
A prolonged slump in diamond prices and operational setbacks has seen the South African diamond miner struggle to generate cash flow. During the third quarter Petra reported an increase in net debt to $258m compared to $215m at the interim stage.
In terms of today’s announcement, Petra said it had extended R1.75bn in senior long-term debt to December 2029 while increasing interest payable and amortising R750m of the sum by June 2029. The debt was to have matured in January.
In addition, the repayment of loan notes valued at $225m as of December 31 and due in March has been extended to December 2030. Shareholders have agreed to a lock-up, effectively a moratorium on converting the notes until the new expiry date.
The rights issue – described by Petra today as an “equity backstop” and which has been guaranteed by existing shareholders – will see shares issued at 16.5 pence per share. Petra is trading at 17.66p/share on the London Stock Exchange.
“We have been working hard to streamline and optimise our business to unlock a compelling long-term value proposition leveraging our two world class assets,” said Vivek Gadodia, joint interim CEO of Petra in an announcement.
Rough diamond prices are estimated to have shed 5% this year amid an outflow of goods from China while economic uncertainty has put the skids under consumer confidence. The rising popularity of laboratory-grown diamonds have also taken market share from naturally mined diamonds.
In reponse to difficult trading conditions, Petra last year restructured its project pipeline at its Cullinan and Finsch mines in an effort to ease pressure on its balance sheet. It also restructured staff and sold its stake in Williamson in Tanzania, and closed Koffiefontein in South Africa. It also parted ways with its CEO of six years, Richard Duffy.
Lenders are hoping Petra has enough time to recover, aided by an improved market. It’s not the first time the company has been in dire straits, however.
It was Duffy who helped dig the company out of a financial hole when in 2020 he extracted an agreement from bondholders who swapped $650m for shares. This followed a $223m loss, including $91.9m in impairments, for the 12 months ended June 2019.
