LONDON, May 24 (Reuters) – Mining firm Petra Diamonds said it aims to raise $178 million to help cut its debt burden, and warned it could run low on working capital and breach its debt covenants if shareholders do not back the proposed rights issue.
Petra, which last month finalised an agreement with its lenders for a waiver of its December 2017 debt covenant and a resetting of debt agreements for this year, said it would offer new shares at 40 pence.
That marks a 35.6 percent discount to the theoretical ex-rights price of 62.15 pence calculated in reference to the closing price of its shares on Wednesday.
Shares in the London-listed company tumbled as much as 19 percent after the company's statement.
"If the resolutions to be proposed at the special general meeting are not passed, the rights issue will not take place and the company will not receive the net proceeds from the rights issue of approximately US$170 million," Petra said in a statement announcing the new share issue.
"In such circumstances, the company is of the opinion that the working capital available to the group will not be sufficient during the working capital period based on the reasonable worst case scenario."
Investors will vote on the rights issue in a special general meeting set for June 13.
Petra has been hit by production delays, strikes, a confiscated consignment of diamonds and a strong South African rand and has sought waivers from its lenders three times.
There were also no refunds on value-added-tax (VAT) from the Tanzanian government.
Petra said it would use up to $120 million from the cash call to pay down debt and the balance would buffer its working capital against the strength in...