REG-Petra Diamonds: Completion of the Restructuring

Petra DiamondsAnnouncement

10/03/2021 08:05

FOR IMMEDIATE RELEASE

 10 March 2021   LSE: PDL 

Petra Diamonds Limited

("Petra", "PDL" or the "Company" or, in conjunction with its subsidiaries, the
"Group")

Completion of the Restructuring

Introduction

The Company is delighted to announce that it has today completed the
implementation of the recapitalisation of the Group (the "Restructuring")
initially announced on 20 October 2020. 

The key features of the Restructuring are as follows:
1. partial reinstatement of the Notes debt and the contribution by holders of
the existing Notes of US$30.0 million in New Money, each taking the form of
new senior secured second lien notes (the "New Notes").  The New Notes amount
to approximately US$337.0 million (including the New Money and fees paid as
part of the transaction in New Notes);
2. conversion of the remainder of the Notes debt into equity, resulting in the
Noteholder group holding 91% of the enlarged share capital of PDL;
3. restructuring of the first lien facilities provided by the South African
lender group; and
4. new governance arrangements and cashflow controls.
 CEO Richard Duffy comments:

“The completion of the Restructuring is a significant achievement for Petra
and I would like to thank our noteholders, lenders and shareholders for their
continued support.  The Restructuring will provide Petra with a stable and
sustainable capital structure, significantly reduced financial burdens and
greater liquidity, leaving us in a stronger position to focus on optimising
the value of our diversified asset base and to deliver growth for all our
stakeholders.”

Admission of New Ordinary Shares

As part of the Restructuring and pursuant to the debt for equity conversion
announced on 22 December 2020, at 8.00 a.m. today, 8,844,657,929 New
Ordinary Shares were admitted to listing on the premium segment of the
Official List of the FCA and admitted to trading on the London Stock
Exchange's main market for listed securities ("Admission"). Following
Admission and completion of the Capital Reduction, the Company’s New
Ordinary Shares trade under the new ISIN BMG702781417 to reflect the change in
the nominal value to 0.001p per share.

Voting Rights and Share Capital

In accordance with its obligations under the FCA's Disclosure Guidance and
Transparency Rules (the "DTRs"), the Company hereby confirms that, as at the
date of this announcement, the Company's share capital consists of
9,710,089,272 Ordinary Shares of 0.001 pence each in issue with voting rights,
none of which are held in treasury.

The figure of 9,710,089,272 may be used by shareholders as the denominator for
any calculations by which they will determine if they are required to notify
their interest in, or a change to their interest in, the Company under the
DTRs.

Appointment of Non-Executive Director

The Company is also pleased to announce that the appointment to the Board as a
Non-Executive Director of Mr. Matthew Glowasky, whose prospective appointment
was initially announced on 22 December 2020, became effective immediately upon
Admission.

Overview of the Restructuring

The key features of the Restructuring are:
1. Reinstatement of Notes debt and New Money
New Notes

All Noteholders had a right to elect to contribute a portion of US$30.0
million of new money provided to Petra Diamonds US$ Treasury Plc (the "New
Money") pro rata to their existing holdings of the Notes, as a subscription
for New Notes.  The New Money was structured to incentivise participation by
Noteholders, including in relation to the treatment of their existing Notes
debt (as further described below).

A portion of the existing Notes debt was reinstated alongside the New Money
notes; also in the form of New Notes. The New Notes have been allocated as
follows:
1. US$30.0 million (reflecting the New Money) allocated only to those
Noteholders that subscribed, and funded that subscription, to the New Money,
pro rata to their New Money contribution (the “New Money Noteholders”);
2. US$150.0 million allocated only to those New Money Noteholders, pro rata to
each holder's contribution to the New Money;
3. US$145.0 million allocated to all Noteholders (including the New Money
Noteholders), pro rata to their holdings of existing Notes at the close of the
Restructuring; and
4. a further amount of New Notes as consideration to certain Noteholders,
including the Ad Hoc Committee, in remuneration for the commercial risks and
other commercial considerations borne by those Noteholders whilst restricted
for the purposes of negotiations with other stakeholders and work performed in
connection with the Restructuring.  The quantum of New Notes issued for this
purpose was approximately US$12.0 million, including, without limitation: 1.
New Notes issued to any Noteholder who executed the Lock-Up Agreement on or
within 14 days of the date of the agreement (the "Early Bird Fee"), where the
Early Bird Fee was equal to 1.0% of the aggregate principal amount of such
Noteholder's existing Notes as at the date 14 days after the date of the
Lock-Up Agreement; and
2. New Notes issued to certain Noteholders who agreed to provide any portion
of the New Money that was not otherwise provided by the other Noteholders in
the form of a pro rata allocation of US$1.5 million of New Notes.
Material terms of the New Notes:
1. Interest rate (payable every six months as follows):
1. 9 March 2021 to 31 December 2022: PIK interest at a rate of 10.50%;
2. 1 January 2023 to 30 June 2023: PIK interest accrues at a rate of 10.5%
per annum on 37.7778% of the aggregate principal amount of the New Notes and
cash pay interest accrues at a rate of 9.75% per annum on 62.2222% of the
aggregate principal amount of the New Notes; and
3. 1 July 2023 to maturity: cash pay interest at a rate of 9.75%.
(b)  Maturity date: 5 years from completion of the Restructuring.

(c)  Non-call protection: 2 year non-call protection (customary make-whole),
and coupon step-down profile thereafter at 104.88, 102.44, then par.

(d)  Covenants: customary for a financing of this type, including (i) a
change of control provision requiring a change of control offer at 101% and
(ii) a minimum liquidity covenant.

(e)  Guarantors, security and ranking: second-ranking guarantees and security
provided on substantially the same terms as under the existing Notes, with
certain amendments agreed in line with corporate restructuring steps.  Other
than in relation to assets in Tanzania, enhancements to the security package
were agreed, including, but not limited to, security over intra-group offtake
receivables and inventory at all relevant points in the supply chain until the
inventory is sold to a third party.  Such enhancements were also included in
the first lien security package.

(f)   Intercreditor agreements: to reflect second-ranking guarantees and
security and certain additional intercreditor arrangements, including payment
stops and conditions to paying cash interest (which include: (i) that the
amount drawn under the new Revolving Credit Facility ("RCF") shall be no more
than ZAR400 million immediately prior to, and shall not be forecast to be for
two weeks following, the interest payment; and (ii) compliance with a minimum
unrestricted cash covenant of US$20.0 million) and customary enforcement
limitations, subject to the requirements and covenants of the first lien debt
(including compliance with a first lien debt service cover ratio (see Section
3 below for further details).

The above arrangements with respect to the Notes were effected through an
English law scheme of arrangement under Part 26 of the Companies Act 2006.

The holders of the New Notes have been granted certain rights, and some
ongoing financial oversight, over the business of the Group, including with
respect to governance and cashflow controls. Certain of these are summarised
at paragraph 4 below.

2.         Equity

Debt for Equity Conversion

The remainder of the existing Notes debt was exchanged for equity in PDL (the
"Debt for Equity Conversion"), whereby New Ordinary Shares were issued to the
Noteholders in consideration for the assignment of existing Notes debt.  The
Debt for Equity Conversion has resulted in the Noteholder group holding 91% of
the enlarged share capital of PDL in the following proportions:
1. 56.0% of the enlarged share capital was issued to all Noteholders,
including the New Money Noteholders, pro rata to their holdings of existing
Notes at the Scheme Record Time (to the extent any Noteholder did not take up
their equity entitlement, such entitlement was allocated to the remaining
Noteholders who did not opt out of their equity entitlement, on a pro rata
basis); and
2. 35.0% of the enlarged share capital was issued to the New Money Noteholders
only, pro rata to their contribution of the New Money (to the extent any such
Noteholders did not take up their equity entitlement, such entitlement was
allocated to the remaining Noteholders who contributed to the New Money and
who did not opt out of their equity entitlements, on a pro rata basis).
As a consequence of the Debt for Equity Conversion, 9% of the enlarged PDL
share capital remains with the previous PDL shareholders (subject to dilution
as a result of standard management equity incentive arrangements).

Implementation

The Debt for Equity Conversion was approved by the existing shareholders of
the Company at a special general meeting of the Company held on
13 January 2021.

3.         Arrangements with the South African lender group

The various previous arrangements with the South African lender group,
including the ZAR500 million working capital facility (the "WCF"), the ZAR400
million RCF, the financing arrangements in respect of the Group's BEE partners
(the "BEE Facilities") and the Group's general banking facilities were
restructured as part of the Restructuring.

The new bank facilities comprise the following, on a first lien basis and on
substantially the same terms (or better for the Group) as under the previous
documentation:

Term Loan
1. Available in a principal amount of ZAR1.2 billion (ca. US$69 million),
borrowed by the previous obligors in the Group in order to refinance the
previous drawn ZAR500 million (ca. US$29 million) WCF and outstanding
principal amounts of the BEE Facilities (approximately ZAR683 million (ca.
US$39 million)).
2. Final maturity date: 3 years from completion of the Restructuring.
3. Scheduled amortisation of 9% of principal per quarter (starting in June
2021) with a final 10% of principal repayment at maturity.
4. 1.3x debt service cover test ratio tested semi-annually on a rolling 12
month basis and minimum actual and forecast liquidity covenant maintained at
US$20 million at all times, which if breached will give rise to an event of
default under the new bank facilities.
5. Interest rate of JIBAR + 5.25% per annum (with an upfront fee of 1% of the
Term Loan amount capitalised).
RCF
1. Available in a principal amount of ZAR560.0 million (ca. US$32 million)
constituted by a rollover of the previous RCF but upsized by ZAR160.0 million
(ca. US$9 million).
2. Final maturity date: 3 years from completion of the Restructuring.
3. Scheduled reduction in the committed amount under the RCF of 9% of the
total initial commitments per quarter (starting in June 2021) with a final
10% reduction at maturity.
4. 1.3x debt service cover ratio tested semi-annually on a rolling 12 month
basis and minimum actual and forecast liquidity covenant maintained at US$20
million at all times, which if breached will give rise to an event of default
under the new bank facilities.
5. Interest rate of JIBAR + 5.25% per annum (with an upfront fee of 1% of the
RCF amount capitalised and a commitment fee based on undrawn balances).
Ancillary Facilities

Derivative, guarantee, foreign exchange and intra-day exposure lines have been
provided by existing lenders up to an agreed amount consistent with current
requirements and on substantially the same terms as the Group's previous
arrangements.

Hedging

The existing arrangements have been rolled over to provide hedging against
foreign exchange risk on the same terms as the Group's previous arrangements
and under market standard ISDA documentation.

4.         Additional rights for holders of the New Notes

Directors and Corporate Governance
1. Certain individual noteholders (in their capacity as shareholders of PDL
following completion of the Restructuring) who individually hold at least 5%
of the shares in PDL (taking into account the shares issued pursuant to the
Debt for Equity Conversion) at the closing of the Restructuring have
"Nomination Rights" to:
1. nominate persons for appointment to the Board as a non-independent,
non-executive director; and
2. appoint observers to the Board (such person shall not have voting rights at
Board meetings),
it being acknowledged that the Company shall comply with the UK Listing Rules
and the UK Corporate Governance Code on the appointment of additional
independent non-executive directors as applicable.

(b)  The Nomination Rights were allocated to certain individual Noteholders
who executed the Lock-Up Agreement on, or within 14 days of, the date of the
Lock-Up Agreement (the "Deadline"), provided they were projected to satisfy
the minimum shareholding requirements set out above in (a).

(c)  Details of the Nomination Rights were included in the PDL combined
circular and prospectus published in connection with the Debt for Equity
Conversion, and the appointment of Mr. Matthew Glowasky referenced above was
made pursuant to one such Nomination Right.  The PDL combined circular and
prospectus also disclosed the intention that the previous directors of PDL
remain in office following completion of the Restructuring.

(d)  The Board will, following completion of the Restructuring, form an
advisory investment committee, which includes directors appointed pursuant to
Nomination Rights in order to monitor significant capital and other
investments and recommend their adoption to the full Board.

(e)  A cash bonus and/or equity-based management incentive plan has been
implemented by the Remuneration Committee post-completion of the
Restructuring, which has been designed to incentivise and reward business
performance and to achieve or exceed targets set by the Board, which includes
targets relating to cash generation and leverage and performance against the
PDL business plan.  Such arrangements were put forward in the normal course
for approval by shareholders at the AGM.

Cashflow Control Enhancement Covenants

In addition to further restrictive covenants and a tightening of existing
covenants and baskets in relation to the New Notes, all Group cashflows,
whether from operations or otherwise, will be applied in accordance with a
cashflow waterfall protocol, to which all stakeholders have agreed.  The
protocol includes:
1. transparent and orderly cashflow management in the ordinary course;
2. recording and implementation of the agreed terms and priority of ordinary
course payments as between the operating companies, the rest of the Group, the
BEE partners, the South African lender group and the Noteholders and
restricted payments; and
3. debt service waterfalls, reflecting the priority and application of
payments to the banks as first lien debt providers and to the Noteholders as
second lien debt providers, subject to fulfilment of existing payment
obligations to BEE partners up to a maximum threshold amount.
Capitalised terms used but not defined in this announcement have the meaning
given to them in the explanatory statement dispatched to Scheme Creditors on
10 December 2020 or in the combined prospectus and circular published by the
Company on 22 December 2020, which is available on the Company's website
(www.petradiamonds.com/investors/2020-financial-restructuring/), as
applicable.

~ Ends ~

For further information, please contact:

Petra Diamonds,
London                                        
Telephone: +44 20 7494 8203

Des Kilalea
                                                    
            investorrelations@petradiamonds.com

Marianna Bowes 
                                                      

Rothschild & Co

Giles
Douglas                                                
            giles.douglas@rothschildandco.com

Glen
Cronin                                                    
            glen.cronin@rothschildandco.com

Mahir
Quraishi                                               
            mahir.quraishi@rothschildandco.com

About Petra Diamonds Limited

Petra Diamonds is a leading independent diamond mining group and a consistent
supplier of gem quality rough diamonds to the international market. The
Company has a diversified portfolio incorporating interests in three
underground producing mines in South Africa (Finsch, Cullinan and
Koffiefontein) and one open pit mine in Tanzania (Williamson).

Petra's strategy is to focus on value rather than volume production by
optimising recoveries from its high-quality asset base in order to maximise
their efficiency and profitability. The Group has a significant resource base
of ca. 243 million carats, which supports the potential for long-life
operations.

Petra conducts all operations according to the highest ethical standards and
will only operate in countries which are members of the Kimberley Process. The
Company aims to generate tangible value for each of its stakeholders, thereby
contributing to the socio-economic development of its host countries and
supporting long-term sustainable operations to the benefit of its employees,
partners and communities.

Petra is quoted with a premium listing on the Main Market of the London Stock
Exchange under the ticker 'PDL' and is a constituent of the FTSE4Good Index.
The Company’s US$337 million notes due in 2026 will be admitted to the
official list and trading on the regulated market of the Irish Stock Exchange.
For more information, visit www.petradiamonds.com.

Important Notice

This announcement contains statements about Petra that are or may be forward
looking statements. All statements other than statements of historical facts
included in this announcement may be forward looking statements. Without
limitation, any statements preceded or followed by or that include the words
"targets", "goals", "should", "would", "could", "continue", "plans",
"believes", "expects", "aims", "intends", "will", "may", "anticipates",
"estimates", "hopes", "projects" or words or terms of similar substance or the
negative thereof, are forward looking statements.

Such forward looking statements involve risks and uncertainties that could
significantly affect expected results and are based on certain key
assumptions. Many factors could cause actual results to differ materially from
those projected or implied in any forward looking statements. Due to such
uncertainties and risks, readers are cautioned not to place undue reliance on
such forward looking statements, which speak only as of the date hereof. Petra
disclaims any obligation to update any forward looking or other statements
contained herein, except as required by applicable law or regulation.

N.M. Rothschild & Sons Limited ("Rothschild & Co"), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority, is acting
exclusively for Petra and no one else in connection with the contents of this
announcement and will not be responsible to anyone other than Petra for
providing the protections offered to clients of Rothschild & Co nor for
providing advice in relation to the subject matter of this announcement or any
other matters referred to in this announcement.



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