Eqstra Falls Second Day on Questions About Debt Burden

  • Total debt more than eight times distributor's market value
  • Company's shares trading under cautionary warning since Feb.

Eqstra Holdings Ltd., a South African importer and distributor of industrial, construction and mining equipment, fell for a second day.

Shares of Eqstra, which have been trading under at least one cautionary announcement for more than two months, fell 4.4 percent to 1.96 rand by the close in Johannesburg, valuing the company at about 795 million rand ($54 million). The stock dropped 8.1 percent Wednesday.

Yields on the Johannesburg-based company’s bonds climbed to a record on Wednesday. Eqstra has 1.67 billion rand of bonds maturing in the next two-and-a-half years, according to the company. Total debt, including bank loans, reached 7.55 billion rand as of Dec. 31, the company said in a stock exchange statement on March 1.

The slump is the result of “continued questions around the sustainability of Eqstra, uncertainty regarding the continued cautionary announcement under which the share is trading, and the fact that you have a downward price discovery increasing volatility in the stock,” said Keith McLachlan, money manager at Alphawealth Asset Management. “It’s a combination of those three factors.”

South Africa’s mining industry, which accounts for more than half of its exports, has been hit by a global slump in commodity prices, exacerbated by signs of slowing growth in China, the world’s second-largest economy and the biggest importer of the nation’s raw materials.

(Corrects story from May 5 to clarify company not seeking to refinance bonds in third paragraph; period of maturities in third paragraph; attributes debt outstanding to company.)
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