Embattled Faritec will proceed with a rights offer to raise the R60 million it needs to keep operating.
The company said late last year that it needed to raise R60 million to implement its turnaround and growth strategies, pay creditors and cover working capital.
Faritec is targeting a return to profitability this year, after being hammered by the global recession that hit the world in late 2008.
It has been in discussions with various parties, including majority shareholder Shoden Data Systems, to raise money, and was in talks with Shoden to partially underwrite a rights offer.
Shoden has already pumped R20 million into Faritec, while shareholders had previously subscribed for another R29 million.
Faritec says it will issue shares to the market to raise the R60 million. However, the rights offer is subject to terms and conditions that are still under discussion.
Chris Gilmour, Absa Investment analyst, says there is a danger that the company may not raise all the money it needs if the rights offer is not underwritten, although it is difficult to quantify the extent to which the offer would be taken up.
“Trying to go for a rights issue at this time is brave,” Gilmour says, commenting on the market's aversion to risk.
Faritec is issuing the shares at 1c each, which means it would have to issue six billion shares. It has 1.2 billion shares in issue, says Gilmour.
“Further details regarding the rights offer will be disclosed over the next few days,” Faritec says.
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