JSE-listed packaging group Nampak has successfully concluded credit-approved term sheets with revolving credit facility and term loan lenders and US private placement noteholders for a favourable refinancing package, on terms and conditions which are acceptable to it given the prevailing circumstances.

The revised debt structure will comprise core and noncore debt at Nampak Products of R5-billion and Nampak International of R286-million and $34.6-million.

The debt overhang of R1.9-billion, primarily associated with legacy expansion activities in Angola and Nigeria, will be housed in a new Intermediate Holding Company, which will be interposed between Nampak and both Nampak Products and Nampak International.

"Nampak is of the view that the debt restructure is a suitable enabler to the restructuring and turnaround plan that is underway," the company said in a trading statement published on August 14.

The revised debt structure will provide a simplified lender structure on implementation date, and proceeds from the R1-billion rights offer will be used to repay debt on the implementation date.

Further, the revised debt structure will reduce dollar-based financing to minimise exchange rate exposure with a clear path to redeem the US private placement noteholders debt of $24.6-million, after the application of a proportion of the rights offer proceeds, within the next 18 months, the company said.

Additionally, the revised debt structure will also provide a borrowing-base facility of R2.58-billion at Nampak Products and a revolving credit facility of $10-million at Nampak International. This will provide flexible working capital financing secured through Nampak’s high-quality debtors book and inventory.

The revised debt structure has also garnered strong support from the big four South African banks, including a commitment to finance Nampak in the long term, underpinned by its turnaround strategy, the company added.

"Nampak is now well positioned to launch the proposed rights offer, which is anticipated to be launched on or about August 31.

"The declaration and finalisation information in respect of the rights offer will be announced in due course. A circular setting out the terms and conditions of the rights offer is anticipated to be published on the company’s website on or about September 4," the company said.

Nampak's turnaround strategy is predicated on, among others, a clear strategy to direct its focus onto its core Metals business, namely Bevcan SA, Bevcan Angola and Divfood. The strategy will result in the disposal of several assets over the next 18 months under its asset disposal plan, which is aimed at raising about R2.6-billion.

Additionally, the strategy will see the reduction of leverage, targeting a more sustainable net debt to earnings before interest, taxes, depreciation and amortisation ratio of below three times for the 2024 financial year, with this ratio expected to improve post the receipt of the proceeds from the asset disposal plan to below two times by September 30, 2025, with further improvements thereafter from internally generated cash.

Other key initiatives involved in the turnaround strategy include the right-sizing costs and unearthing inefficiencies, revenue growth management, optimised working capital, and the merging of Bevcan of Divfood.

"The net result of the turnaround strategy is that Nampak will become a more focused, better capitalised business, with improved profitability metrics and a lower net investment in operating assets generating a return on invested capital (ROIC) in time that exceeds the group’s last reported weighted average cost of capital (WACC) of 13.6%.

"The greater cohesion created through the restructuring and focus on its core competencies will ensure that the group can continue to deliver the best solutions for its customers, driving growth in its core categories and increasing its market share," it said.

The high-level targeted key financial indicators of core Nampak and a high-level group outlook include that ROIC must exceed WACC by the 2027 financial year.

"Positive progress is being made by the group on numerous transformational workstreams, right-sizing initiatives and the company’s proposed asset disposal program. Further announcements will be released by the company in due course, as negotiations progress further and/or binding offers are obtained.

"The finalisation of the term sheets is a critical milestone in the company’s overall turnaround plan," it noted.

CEO APPOINTED
Further, as part of the group’s turnaround strategy, the board has appointed Phildon Roux as CEO, with effect from September 1, after having served as interim CEO since April.

Roux has 32 years’ experience in the fast moving consumer goods sector, having held numerous executive positions inclusive of CEO, executive and nonexecutive director.

He has previously held board positions as an executive and nonexecutive director at Pioneer, Tiger Brands, Oceana, Sea Harvest, Dairybelle, Langeberg and Ashton Foods and as chairperson of Tiauto.

Additionally, as the CEO of Adcorp, he was instrumental in the turnaround of the organisation.

Roux will be supported by Nampak CFO Glenn Fullerton, who has held the position for the past eight years, and by Nampak chief restructuring officer Michael Dorn, as well as the company’s newly appointed executive team.