Solution Dynamics to tap shareholders after covenant breach

Solution Dynamics turns to shareholders after covenant breach

By Paul McBeth

March 7 (BusinessDesk) – Solution Dynamics Ltd., the NZAX-listed software company, plans to raise funds in a discounted rights offer after breaching a bank covenant.

The company wants to raise some $750,000 in a 1-for-3 pro rata renounceable rights issue at 20 cents a share to reduce its cash deficit. That’s a 33% discount to the current price 30 cents. The shares have dropped 21% this year.

The funds would ensure Solution Dynamics comes back within the terms of its banking facility, after breaching its receivable-cover covenant. If trading comes in as forecast, the company also will have breached its interest cover covenant in February and March of this year.

Solution Dynamics was in breach of its interest cover covenant until September last year and breached its receivables cover covenant as at Dec. 31.

The cash deficit “has come about due to delays in securing forecasted software division revenues,” the company said. “It is disappointing to have to make this call, because the forecasting of sales and consequent cash flows has missed the mark.”

Solutions Dynamic, which provides services such as database and print management, cut its forecast earnings before interest, tax, depreciation and amortisation to $700,000 in the 12 months ended June 30, from $1 million previously projected. It tripled its first-half profit to $121,000 in the six months ended Dec. 31.

The company may need another capital injection if forecast sales and cost cuts aren’t met, it said.

The rights offer opens on March 23 and closes on April 12.

(BusinessDesk)

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