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Johannesburg - PPC [JSE:PPC] shares dropped to a 13-year low after the cement maker said it would accelerate and strengthen a plan to raise capital following a credit-rating cut by Standard & Poor's (S&P), which warned of a possible liquidity squeeze in the coming weeks.
S&P cut PPC’s long- and short-term corporate credit ratings seven levels to below investment grade and placed its long-term rating on negative watch, the ratings company said late on Monday. As a result, holders of PPC’s R1.75bn of domestic medium-term notes can choose to redeem the securities and interest, the Johannesburg-based company said in a statement on Tuesday.
“The severity and timing of this ratings action was unexpected and has therefore compelled the company to accelerate its capital raising plans and increase the quantum of the previously planned capital raise, in order to make provision for the potential redemption of the notes,” PPC said.
The company said May 23 it was preparing a capital raising of R3bn to R4bn to cut debt and fund expansions.
PPC is expanding in Africa to counter tough competition and falling prices in its home market. Projects are located in the Democratic Republic of Congo, Zimbabwe and Ethiopia.
The company’s ratio of adjusted debt to earnings before interest, taxes, depreciation and amortization will average four times in the 2016 and 2017 financial years due to the heavy capital expenditure plans and a weaker operating environment in South Africa, S&P said on Monday.
PPC plans to raise as much as R4bn through a rights issue and will also consider other forms of equity capital raising as appropriate, it said on Monday. Details of the rights issue will be announced on June 14, when the company is scheduled to report annual results.
PPC fell as much as 9% in Johannesburg on Monday to R9.35 a share, the lowest since March 2003, before recovering to a 2.9% decline at 9:27. The shares have slumped 51% in the past 12 months.
