Nampak shares fall after proposing rights issue

Nampak’s share price plunged more than 30% on Thursday in its worst-yet one-day drop after the packaging group proposed a rights issue to the tune of R2bn to meet its debt obligations.

The share price traded at just R1.25 on the JSE in midmorning trade, compared with a peak of R40 a few years ago.

The debt-laden company will convene an extraordinary meeting on December 15 to seek shareholder approval for the right issue exercise. The lion’s share of the money (R1.35bn) from the rights issue will be used to repay lenders as a minimum requirement for refinancing.

Nampak’s push into the rest of the continent between 2010 and 2012 has seen it rack up a debt pile that stood at R5bn by end-March, far outpacing its current market value of R897.6m.

Its Africa operations span 10 countries, many of which depend on commodity prices, which are inherently volatile and tend to disproportionally hit their currencies in a downward commodity cycle. There was also a general lack of foreign currency availability in these jurisdictions, according to Nampak.

The historical decisions to fund the African expansion mainly with dollar debt has meant that macroeconomic and operational pressures placed significant strain on the balance sheet and required the group to seek covenant relaxations from its funding partners.

This has resulted in an increase in funding costs, which has been more acute in the context of rising commodity prices and high interest rates that has emerged since the onset of the war in Ukraine.