Russia-focused gold miner Petropavlovsk has lost more than a quarter of its value after unveiling a refinancing plan which includes a deeply discounted cash call.
The deal includes an agreement with 62% of holders of a $310.5m for the restructuring, a new five year bond of $100m, along with a $235m rights issue at 5p a share.
In the market the company’s shares have dropped 26% or 4.25p to 11.75p. Analysts at Numis said:
Petropavlovsk looks to have found a route to complete it’s refinancing. This includes exchanging the existing $311m convertible for a new $100m one, plus a deeply discounted $235m rights issue at 5p.
While formal approval is needed, it looks likely to succeed and will provide a means for restructuring of senior debt as well. Guidance for 2015 has been increased to 680,000-700,000 ounces by feeding in higher grade deposits. Net debt is expected to reduce to $700m.
We see potential for positive free cashflow generation to reduce this further but not enough to make a meaningful impact to support this distressed stock. We maintain our reduce ecommendation but reduce our target price to 10p, from 20p, assuming the financing will proceed as planned.
