Shares of Pact Group Holdings Ltd [ASX:PGH] have hopped up again today by 9.25%, after an almighty soar of 11% yesterday.
The price surge was on the back of a reassuring company announcement about its debt refinancing.
This marks a pleasant turn of events for the struggling stock, which first announced the extent of its troublesome debt issues in February.
Why did Pact’s debt need refinancing?
Earlier in the year, the packaging solutions provider revealed non-cash asset impairments of $310–340 million after tax in its half-year accounts. This was both in its packaging assets and goodwill in Australia.
Only months earlier in August 2018, the company had announced that it’d be expanding its closed loop pooling operations through the acquisition of TIC Retail Accessories for $122 million. The share price plummeted 22% in just one day on the news, and the group’s full-year FY18 results didn’t help.
But Pact has now declared that it has effectively wagered a plan to extend debts worth $380 million, maturing in July 2020, to January 2022, at ‘competitive terms’. A subordinated debt facility has been given the tick of approval from lenders.
The company at present is now engaged in a $50 million, six-year subordinated unsecured term loan. These funds will be used to pay down old debts and provide the Group with more flexibility in terms of funding.
At this stage, management appears confident in the arrangement. It seems investors do, too.
Are Pact Group shares worth buying?
Everyone loves a share price rebound.
And it’s great to see that Pact is taking charge of their debts.
But while the share price makes a pretty picture on the ASX this week, it’s important to remember that it’s still down about 24.4% so far this year. That’s very short of its 52-week high that was hit in August 2018.
There could also be another share price rebound later in the year, which the stealthy might want to hold on for.
Whether the company turns around its fortunes or not is anyone’s guess, but it could be prudent to wait. Perhaps a good idea would be to examine your personal risk profile on this one!
For Money Morning
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