South Africa's Pick n Pay said it was planning a rights issue to raise up to 4 billion rand (€190 million) and listing its discount grocery chain Boxer to shore up near-term liquidity as the supermarket group's debt surges.
The retailer also warned it would swing to a full-year headline loss.
New chief executive Sean Summers is tasked with turning around a company that has been losing market share against bigger rival Shoprite and others for more than 10 years in a highly promotional retail environment and an economy constrained by high interest rates, inflation and energy costs.
Announcing a two-step recapitalisation plan four months after Summers' appointment, the retailer said the rights issue will be to existing shareholders, and Boxer will be listed on the Johannesburg Stock Exchange.
The rights issue is expected to take place in the middle of 2024, with the listing of Boxer following towards the end of the year. The group intends to retain a majority stake in Boxer, it said.
Two-Step Recapitalisation Plan
'The board believes that the two-step recapitalisation plan is the best course of action to not only stabilise the group's balance sheet, strengthen group liquidity and provide adequate capital funding for long-term sustainable growth, but importantly to unlock shareholder value,' the retailer said.
The Ackerman family, which founded Pick n Pay and is its controlling shareholder, has given in-principle support for the proposed plan.
The group also said that disappointing trade performance at the core Pick n Pay supermarkets, increased inventory and strategic investment in its growth plans have led to a marked increase in net debt to 7.2 billion (€350 million) rand as of 21 January, from 3.8 billion (€180 billion) rand on 27 August.
To ensure continued compliance with the group's long-term debt covenants, the retailer said it had approached key lenders under its long-term syndicated and bilateral loan facilities.
The lenders have agreed to waive all covenants on the facilities as of 25 February while amending them for 31 August 2024.
'These waivers have provided the group with sufficient time and flexibility to strategically assess the group's gearing position and progress the optimal course of action to correct the capital structure,' Pick n Pay said.
