Polypipe Group Plc (LON:PLP) has agreed an additional £50mln revolving credit facility with its banking group to support the company as it continues to deal the impacts of the coronavirus (COVID-19) pandemic.
The plumbing product manufacturer has also laid out plans for a £120mln equity funding to be arranged by Deutsche Bank and Numis, and, it will be supported by participation of the senior management team.
An accelerated bookbuild process is now underway.
It said that the injection of capital will be used to strengthen the balance sheet, reduce overall debt, reduce leverage and protect the company against any potential breach of banking covenants as the business and its markets reopen and recover through the remainder of 2020.
The credit additional facility is available for the next twelve months and it is in addition to an existing £300mln RCF which is committed until November 2023.
Additionally, the banking group has agreed to temporarily waive certain requirements under the RCF and suspend a quarterly covenant test that was slated for June.
Polypipe also has fully established a £100mln euro-commercial paper programme (ECP) in response to the government’s initiatives designed to help United Kingdom businesses during the pandemic.
As previously announced the company has been operating at around 70% below normal demand, with the work it is conducting largely comprising urgent NHS and care-related activity, along with some infrastructure and essential repair, maintenance and improvement (RMI) jobs.
Today, the company added that uncertainty remains regarding the impact COVID-19 is having on its markets particularly new house building, RMI and commercial markets.
Nonetheless, it has detailed two possible scenarios that have been analysed by the company.
The first operating case assumes trading remains 70% below 2019 levels in the period between April and June, before a phased recovery in trading through July to September and in the period of September through December and into 2021 key business units will be seeing trading just 10-15% below last year’s comparatives.
A more ‘prudent’ scenario analysis assumes that the latter period, September to December and into 2021, sees trading at around 20-25% below last year.
As previously announced, the company’s management has taken a number of actions in response to the COVID-19 challenges.
Some 60% of the workforce was furloughed, capex was “severely curtailed”, agency staff have been stood-down, discretionary spending has been curtailed, and the 2019 final dividend was cancelled.
Management salaries were reduced and certain tax payments were deferred, by agreement, and, certain lease terms and supplier contract terms were renegotiated.