Retailer Pepkor plans to raise as much as R2bn to help it strengthen its financial and liquidity position to hedge against the economic pressures brought on by the Covid-19 pandemic.
Pepkor said on Tuesday the proceeds from the capital raise will be used to help it reduce its current gearing level.
The company said it placed 172.5-million shares, representing 4.95% of the issued ordinary shares, to certain institutional investors. The company’s share price closed 1.33% lower at R11.97.
Pepkor is also looking to use the proceeds to help support its business through the Covid-19 uncertainties, as well as to provide investors the opportunity to invest in the growth of Pepkor, it said.
“In addition to other cash-saving initiatives already undertaken by the group, the placement will help Pepkor to further enhance the liquidity profile and increase resilience of its balance sheet, should a more negative macroeconomic scenario realise,” Pepkor said.
Pepkor has been at risk of missing its debt reduction targets due to the economic turmoil presented by the coronavirus as SA firms become financially strained. At the end of its financial half-year to March, the company had a debt burden of more than R14bn.
The group said the economic effect was uncertain, even as lockdown restrictions to manage the spread of the virus were eased.
“Pepkor continues to implement measures to protect the group and improve flexibility in its capital structure during these unprecedented circumstances,” the company said.
Pepkor said since the beginning of May, when lockdown regulations were relaxed, sales continued to improve across most of its businesses. It said its “more defensive market positioning, which is aligned to basic consumer needs, continues to drive good performance”.
Liquidity has improved compared to pre-Covid-19 levels due to the positive trading performance and credit book collections, it said. This enabled the group to early settle its R521m bridge term-loan facility.
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