Embattled packaging group Nampak has appointed Phil Roux as its permanent CEO and said its lenders agreed to refinance its debt, which enables the company to proceed with sweeping changes to secure its future.
Roux was acting CEO since April after previous incumbent Erik Smuts resigned from the company, once the darling of the stock market.
In a market update on Monday, the debt-laden packaging group outlined concrete steps it has taken to deal with its debt issue, including concluding credit-approved term sheets, lining up a fire sale of assets and progress in launching its proposed rights offer this September.
The Johannesburg-based group is repairing its balance sheet by raising at least R1bn through the rights offer and will sell many assets over the next 18 months to raise R2.6bn.
The debt refinance package has been agreed to on the basis that it will be implemented with the rights offer, details of which will be released by end-August, as well as the group’s asset disposal plan.
Small Talk Daily analyst Anthony Clark said the underlying narrative on the Nampak refinancing and details of the rights issue were “elegant, crisp, transparent and easily understandable to the market”.
He lauded the group for disclosing much-awaited details on the refinancing, which was “better than expected”, and said the full-time appointment of Roux “is a very solid move because his track record and pedigree in turning about companies, cutting costs and making companies operationally efficient moving back to profit is extremely well known.
“So, this morning’s update on Sens to me I think was a very clear signal that the company is now on the right track,” said Clark. “It is being professionally steered by excellent management, guided by the underlying cabal of shareholders who are controlling the destiny of Nampak.”
Pundits agreed that expectations of R2.6bn in sales confirm the value trap in the company. While most shareholders are likely to back the rights offer it remains unclear whether the capital raise will be underwritten.
Chris Logan, chief investment officer of Opportune Investments, said that it looks as if Nampak is progressing nicely in terms of the debt refinancing, turnaround strategy and proposed rights offer, but he warned that it is going to be a difficult turnaround notwithstanding.
“I would say the rights offer is a done deal,” said Logan “The question being at what price it is pitched at to secure underwriting.”
His sentiment was echoed by Clark, who said the market will now be on “tenterhooks” until September and watching to see whether the cabal of shareholders, who put a stop to the previous rights offer, perhaps come in and underwrite or increase their stake in this proposition.
The supplier of packaging for companies ranging from Coca-Cola to Tiger Brands has been ensnared in a R6bn debt hole created in its ill-fated expansion elsewhere on the continent over the past decade.
In its negotiations with lenders, Nampak has also been able to push out short-term debt repayments to March and September 2024, respectively, instead of September and December 2023.
As part of its turnaround plan, Nampak is merging BevCan and DivFood into one entity. Roux has said potential job cuts are imminent.
“Positive progress is being made by the group on numerous transformational workstreams, rightsizing initiatives and the company’s proposed asset disposal programme,” the company said in a statement on Monday, without giving more details.
Nampak’s share price was 0.43% firmer at R210.90 in afternoon trade on Monday.
Update: August 14 2023
This article has been updated with more information.
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