Omnia Plans to Complete $140 Million Rights Issue in Two Months

(Bloomberg) -- Omnia Holdings Ltd. plans to conclude a 2 billion rand ($140 million) rights issue within the next two months as part of restructuring the group’s debt.

While the fertilizer maker has been struggling to service debt in recent months, it managed to secure a 6.8 billion-rand bridge-loan facility from four banks this week. Proceeds from the rights issue will be used to pay back a part of the loan facility in the next two months, Omnia Chief Financial Officer Seelan Gobalsamy said Tuesday by phone.

“Our shareholders are very supportive of the company and after engagement we are comfortable that the rights issue will go ahead successfully,” said Gobalsamy. “We believe the rights issue is enough to get us on a stable footing.”

Omnia’s interest-bearing borrowings almost doubled to 4.4 billion rand from 2.5 billion rand in the past financial year 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 financing costs more than doubling.

The company wants to reduce its ratio of debt to earnings before interest, taxes and depreciation, amortization to below 2 in the longer term, from around 3.9 currently, Gobalsamy said. To achieve that, and in addition to the debt restructure, the group is cutting excess jobs and expects costs to fall after it starts up its new nitro-phosphate plant, said Managing Director Adriaan de Lange.

Omnia will focus on its capital structure plans and operating efficiencies in the next two years and will only consider additional acquisition opportunities after that, De Lange said.

To contact the reporter on this story: Loni Prinsloo in Johannesburg at lprinsloo3@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Rene Vollgraaff, Liezel Hill

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