* Petra agrees restructuring deal with debt holders
* Plan will give noteholders 91% of the company
* Shares down 3.6% after dropping 18% at open
(Adds analyst comments)
By Helen Reid and Yadarisa Shabong
Oct 20 (Reuters) - Petra Diamonds has abandoned
plans to sell the business in favour of a debt-for-equity
restructuring, it said on Tuesday, sending its shares lower
because of the deal's dilutive effect on existing stakeholders.
The London-listed company, which mines diamonds in South
Africa and Tanzania, had put itself up for sale in June as part
of the restructuring process but has received no viable offers,
it said.
Its shares have slumped by more than 80% this year as the
COVID-19 pandemic has battered the global diamond sector, with
mines forced to shut down while consumer demand collapsed. The
shares opened with an 18% drop and by 0952 GMT were down 3.6%.
Petra said its existing $650 million of bond debt will be
partly replaced by up to $337 million of new notes, including
$30 million of new money contributed by debtholders.
The remaining note debt will be converted into equity,
leaving debtholders with a combined 91% of the company while
diluting existing shareholders to a combined stake of only 9%.
"For existing equity holders it is very dilutive, as
expected," wrote Liberum analyst Ben Davis.
Existing shareholders will be diluted to "next to nothing",
Shore Capital analysts wrote.
Peel Hunt analysts took a more optimistic view, saying the
restructuring would give Petra a more sustainable balance sheet
and help it to benefit from a recovery in markets for rough
diamonds. They calculated that Petra would be left with $444
million of gross debt.
Petra said it expects to seal a "lock-up agreement"
cementing the terms with the noteholder group and South African
lenders in early November. It expects the restructuring to
become effective in the first quarter of 2021.
The agreement also includes new governance arrangements and
cashflow controls.
Petra Chief Executive Richard Duffy expressed the company's
gratitude to the noteholder group and South African lenders for
their agreement in principle to provide "meaningful additional
liquidity" in what has been a difficult period.
(Reporting by Helen Reid in Johannesburg and Yadarisa Shabong
in Bengaluru
Editing by Louise Heavens and David Goodman)
Petra Diamonds (PDL)