Infighting may push AfriSam over the edge

2011-11-05 10:58

The infighting among the shareholders of South Africa’s second-largest cement producer, AfriSam, has taken another turn after Swiss investor Holcim threatened to recover a R2.4 billion debt from the company, a move that will cripple the struggling firm.

This week, the boardroom brawl spilled over into the courts after an audacious bid by the Public Investment Corporation (PIC) to gain control of AfriSam was beaten back by Bunker Hills, which owns 37% of the cement maker.

Bunker Hills won a court interdict in the North Gauteng High Court in Pretoria that prevented the state-owned money manager’s move.

The PIC had tried to convert R4.7 billion worth of preference shares into equity, thereby increasing its shareholding in AfriSam to 90% from 20%.

The PIC is demanding that Bunker Hills pay the R4.7 billion or face the conversion.

If this action had been successful, the stakes of Bunker Hills and Holcim would have been significantly reduced and turned into minorities.

The PIC gave the funding, which it now wants back, in the form of preference shares to a consortium of black investors led by Bunker Hills to help it buy a large portion of AfriSam from construction firm Aveng and Holcim in 2006.

Aveng sold its entire shareholding while Holcim reduced its stake to 15% in the debt-ridden cement company, which this week agreed to pay a fine of R125 million to competition authorities for being involved in a cement cartel.

In a letter dated October 31 and signed by Holcim’s chief financial officer, Thomas Aebischer, the Swiss company flexed its muscle and threatened to force AfriSam into a business rescue situation.

 This if the PIC does not refrain from its action to attach Bunker Hills shares through the conversion of preference shares.

Aebischer’s letter, addressed to PIC chief executive Elias Masilela, reads: “As we have stated consistently throughout our discussions with you, a conversion of the PIC is considered by us as disadvantageous to the company and all its stakeholders, and will ultimately lead to a business rescue procedure.

“These will include calling for dispute resolution between the parties and cause a cross-default of our payment in kind (PIK) notes and lead to business rescue procedure.”

The business rescue programme will result in AfriSam appointing a turnaround specialist to help the company from going into liquidation because of its failure to meet its debt obligations.

Holcim gave Bunker Hills aR2.4 billion loan in the form of PIK notes to help it buy AfriSam.

The deal allows Bunker Hills to repay the debt as and when it can afford to do so.

AfriSam is saddled with a gigantic R19 billion debt, of which R11 billion has to be settled with senior debt holders at the beginning of February next year.

Despite the temporary setback in court, PIC lawyers Norton Rose sent a letter to Bunker Hills this week telling the black-owned firm that the fund manager will continue with its conversion bid.

The matter will be heard again in court on November 29. The PIC is also seeking to remove six directors appointed by Bunker Hills to the AfriSam board.

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