The share price of London-listed Petra Diamonds fell by nearly 10% on Tuesday morning, as it announced that it had reached an in-principle agreement with its lenders with respect to a long-term solution for the recapitalisation of the group and that it was no longer planning to sell the company or parts of the business.
The company, which in June announced that it was considering selling the company or parts of the business, reported that it has been engaged in an extended period of discussions with its South African lender group, as well as an ad-hoc group of noteholders (AHG) regarding the recapitalisation of the group.
The restructuring will include the partial reinstatement of existing notes debt and the contribution by holders of existing notes of new funding; the conversion of notes debt into equity, which will result in the AHG holding 91% of the enlarged share capital of Petra; the restructuring of the first lien facilities provided by the South African lender group; and new governance arrangements and cash flow controls.
As a result of the in-principle agreement reached with its lenders and noteholders, and given that it had not received any offers that provide a viable alternative to the restructuring, Petra decided to not proceed with the sale of the company or its assets.
"We are very pleased to announce today an agreement in principle between the company and our financial stakeholders on the key terms of a restructuring that puts Petra on a viable footing going forward, for the benefit of all our stakeholders. We would like to thank both the AHG and South African lender group for their ongoing support and commitment to the company, which they have demonstrated by agreeing in principle to provide meaningful additional liquidity to the company during this difficult period.
“We own and operate world-class diamond assets; all of our South African mines are now back at normal operating levels, despite being subject to stringent Covid-19 precautionary measures. The Williamson mine, in Tanzania, remains on care and maintenance but we are continually evaluating when we can recommence operations, subject to more favourable market conditions.
"The board believes the agreement in principle announced today provides the business with a stable, deleveraged capital structure that will ensure the short and long-term viability of the company. Today is an important milestone for Petra, and we will continue to work constructively with our financial stakeholders to convert the agreement in principle into legally binding agreements and implement the restructuring," CEO Richard Duffy commented in a release.
Petra, the AHG and the South African lender group will work towards agreeing a lock-up agreement. This is expected to be finalised in early November.
As part of that process, Petra will seek shareholder approval at an upcoming extraordinary general meeting, as well as the agreement of its black economic empowerment partners.
Petra expects the restructuring to be completed during the first quarter of 2021.
The company's share price on the LSE fell by 9.64% on Tuesday morning.