Omnia Said in Talks to Reorganize Debt as Finance Costs Leap

(Bloomberg) -- Omnia Holdings Ltd. is seeking to restructure loans after a series of acquisitions caused the South African chemicals and fertilizer maker’s debt to surge, according to people familiar with the matter.

Management is in negotiations with seven banks to consider options to address its cash needs, said the people, who asked not to be identified because the negotiations are private. Omnia may have to do a rights issue, or convert some of the debt into equity, they said. The company declined to comment “on market speculation” when contacted by Bloomberg, saying it is in a “closed period” while preparing its annual financial statements.

The shares extended an earlier decline to fall 7.2 percent to 49.51 rand as of 4:30 p.m. in Johannesburg. Omnia is down 41 percent this year, the fourth-worst performer in the 164-member FTSE/JSE Africa All Share Index.

Omnia’s interest-bearing borrowings almost doubled in the six months through September compared with a year earlier after the Johannesburg-based company replaced the cash it used to fund acquisitions with bank debt. It also used the loans for additional working capital to fund higher pre-season fertilizer-inventory levels, resulting in a more than twofold increase in financing costs.

The firm last month forecast it will post a full-year loss of at least 400 million rand ($28 million) following the jump in its debt levels and a number of one-off items, including an impairment in Angola, the restructuring of its Protea Chemicals unit, provisions for losses at its Emerging Farmers program due to drought and a slowdown at its Zimbabwean business. Its mining unit continued to experience volume and margin pressure, while the tepid South African economy, increased competition and late plantings hit fertilizer sales.

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