The AMA SA Group [ASX:AMA] The share price is on hiatus today after announcing a $ 150 million fundraiser to strengthen its balance sheet.
AMA expects the capital injection to offset the disruption caused by the pandemic.
The disruption that has seen AMA stocks drop 35% in the past 12 months.
AMA to raise $ 150 million
The fundraising will have two components.
First, there will be a fully subscribed 1 for 2.80 $ 100 million offering prorated to a non-waivable rights offering at 37.5 cents per share, which is the offering price of the shares.
The offer price reflects a 10.7% discount to WADA’s closing price of 42.0 cents on September 3, 2021.
This will result in the issuance of approximately 267 million new common shares.
This number represents almost 36% of AMA’s existing issued capital.
And second, the remaining $ 50 million will be raised via fully subscribed unsecured senior convertible notes maturing in 2027.
These notes can be converted into AMA common shares.
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Why is AMA raising capital?
Simply put, debt.
The euphemism “balance sheet flexibility” made possible by the capital increase is – in clearer language – a way to reduce AMA’s debt.
$ 72.5 million of the capital raised will go to repay the credit facilities.
Liquidity is another major reason for the rise.
AMA will allocate $ 69.3 million in working capital to support the company at a time when travel restrictions are weakening demand for repairs.
AMA Group CEO Carl Bizon commented:
‘This capital increase will provide us with funding and flexibility as we face the headwinds presented by COVID-19 and give us the firepower to execute our strategy.
‘The AMA Group is uniquely positioned to respond to the lifting of the restrictions, and I look forward to us realizing the value inherent in the group.‘
AMA restructures its debt
AMA also announced that it has negotiated with its bank to restructure its debt facilities.
Under the new agreement, AMA will not have any debt facilities maturing until October 2024.
Prior to the restructuring, the company had two facilities maturing in October 2022.
Following a permanent repayment of bank indebtedness totaling $ 72.5 million, the total limit of AMA’s bank facility will be $ 182.5 million.
What does the capital increase mean for the AMA share price?
WADA admitted today that it will likely continue to feel the impact of COVID-19 at 1:22 a.m.
The company is planning pandemic-related restrictions to reduce kilometers driven, directly affecting vehicle repair volumes.
To illustrate this point, AMA noted that as of this month, the NSW Drive and Non-Drive business units were operating at 70% and 60% of unused capacity, respectively.
31 sites were either in hibernation or in partial withdrawal.
While the acceleration of Australia’s vaccination efforts may suggest to some that the worst of the pandemic is behind us, AMA’s struggles with depressed demand reveal that this may not be true for all sectors.
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