Hesto harnesses is part of the Metair group, here we see parts that fit into the body panels of the car.
Image: Nqobile Mbonambi/Independent Newspapers
Metair Investments, a South African automotive components and energy storage group, saw its shares rocket 15.86% to R5.99 on the JSE by 10.35am on Tuesday, after it unveiled a long-awaited capital restructuring plan.
The stock has fallen by a whopping 45.28% in the year to date.
The announcement, ahead of a March 31 deadline flagged last year, offers a lifeline to the debt-laden firm, with the market’s exuberance signaling confidence in the firm's strategy to deleverage its balance sheet amid a challenging automotive landscape.
The restructuring, greenlit by Metair’s board and lenders on March 10, pivots the group’s net debt of around R5.5 billion into a more manageable structure. Although Metair reported in the six-month period ended June 30, 2024, that its net debt was R5.5bn, this was reduced by the December disposal of Mutlu Akü for $110 million (approximately R2bn), netting just $5 million after adjustments. This reportedly slashed 23% of net debt and 73% of interest costs.
“Shareholders are hereby advised that on March 10, 2025, the board of directors of Metair and Metair’s lenders approved a capital restructuring plan, designed to provide Metair with a more sustainable debt structure and appropriately aligned repayment terms,” the company said.
The plan splits refinancing into two chunks: R1.377bn for its Hesto wiring harness unit and R3.3bn for other South African operations.
Hesto’s R1.377bn package will refinance R475 million in existing facilities and settle a loan from its minority shareholder, Japan’s Yazaki Corporation.
The broader South African subsidiaries, dubbed the “SA Obligor,” will tap R3.3bn including a five-year senior debt facility of R1.7bn - split evenly between an amortising loan and a bullet term loan of R850m each - and a R1.6bn mezzanine instrument maturing June 30, 2027.
“The Capital Restructure allows for a repayment profile that matches expected earnings growth and cash flows over a period of five years,” Metair said.
The management said it is closely monitoring debt levels and liquidity, with a priority to reduce debt and de-gear in the medium term.
Metair said, "In addition, the Group is implementing a range of strategies to support de-gearing towards a sustainable capital structure and enhance earnings and cash generation, including effective cash management through, inter alia, the introduction of a Centralised Treasury function, various cost control measures, delaying non-critical capital expenditures and engaging customers for flexible support on capital investments for new models.
The mandatory prepayment provisions for both the Hesto Obligor and SA Obligor will be governed by specific terms outlined in the agreed term sheets, and the company anticipates that all outstanding conditions will be fulfilled within the next two months.
Investors can expect further information regarding the Capital Restructure, including the key terms of the Hesto Obligor and SA Obligor term sheets in the company's annual results and included in the Company's 2024 Integrated Annual Report, on around March 26, the firm said.
Background:
Metair’s debt ballooned as it chased global growth. From a single OEM supplier in 1948, it morphed into an international player by the 2000s, snapping up Romania’s Rombat in 2012 and Türkiye’s Mutlu Akü in 2014. Ambition came at a cost - net debt hit R1.32bn by 2020. The 2021-2022 KwaZulu-Natal floods battered Hesto, while a R1.4bn billion Ford South Africa investment strained cash flow. In 2024, Mutlu Akü bled from lost Russian sales under EU sanctions and Türkiye’s hyperinflation, adding to Metair’s runaway debt.
However, in February 2024, Paul O’Flaherty was appointed as CEO of Metair, the third CEO in a short period, to turn around the fortunes of the firm and accelerate its strategic initiatives, leveraging his extensive experience in turnarounds and restructurings across emerging markets.
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