(Reuters) - New Zealand's Fletcher Building Ltd <FBU.NZ> said it would temporarily pay more interest on its borrowings and use funds from a share sale to repay debt in a deal with its lenders aimed at fixing breaches in debt covenants.
This comes as a relief for the embattled construction firm that has been reeling from deep losses in major projects. Massive cost overruns at its building and interiors business led to the company's breach of its lending arrangements.
Under its new deal with lenders, New Zealand's biggest builder will pay an additional 1.25 percent interest on its borrowings until June 30, 2019.
Fletcher said it will also use proceeds from the disposal of assets and use the $725 million that it recently raised through an entitlement equity offering to repay debt.
"The completion of the entitlement offer means we can now significantly reduce group debt and improve the capital structure of Fletcher Building," said CEO Ross Taylor.
The company will also cut its available credit facilities with syndicate bank lenders to NZ$925 million ($634.6 million) from NZ$1.27 billion earlier, with no change to the maturity of the remaining facilities.
Fletcher shares fell as much as 1.7 percent on Wednesday before cutting some losses to trade down about half a percent at 0241 GMT, in a wider marker <.NZ50> that was down 1.3 percent.
(Reporting by Nicole Pinto and Chris Thomas in Bengaluru; Editing by Stephen Coates and Himani Sarkar)
