Olive branch for AfriSam investors

2011-11-26 08:45

Elias Masilela, the chief executive of the Public Investment Corporation (PIC), extended an olive branch to two key shareholders of AfriSam who are opposing the PIC’s takeover bid of the cement producer.

AfriSam’s major shareholders – Bunker Hills and Holcim, which jointly control 52% of the company – will go toe-to-toe with the PIC in the North Gauteng High Court on Tuesday to prevent the state-owned asset manager from converting a R4.7 billion loan into equity.

This was given to a BEE consortium led by Bunker Hills four years ago to buy a controlling stake in AfriSam.

If the PIC prevails, it will control about 90% of the cement company, while Bunker Hills and Swiss investor Holcim will be reduced to insignificant minority shareholders.

The PIC, owner of a 20% interest in AfriSam, wants Bunker Hills to repay the R4.7 billion (invested through preference shares) or face the conversion.

Said Masilela: “The infighting has been unfortunate. As shareholders of AfriSam, we could have managed this differently. None of us will benefit by putting more stress on the company.”

Earlier this month, Bunker Hills won an urgent interdict that prevented the PIC from taking control of AfriSam after the asset manager tried to attach AfriSam shares belonging to Bunker Hills. On Tuesday, Bunker Hills will seek to make the court order permanent.

But Masilela maintained that the infighting between AfriSam investors was no big deal and could be resolved.

“We don’t see this as a crisis ...This is just a misunderstanding between shareholders with different interests,” he said.

He said the PIC still considered AfriSam a good investment, but the company needed to reduce its hefty and expensive debt, which eats up a big chunk of its cash flow.

The cement maker is saddled with R19 billion of debt and has been battling to service it after the global economic recession squeezed its profits.

In early February next year, the company has to settle about R11 billion of the debt with senior creditors.

But one of these senior creditors, Worldwide Africa Investment Holdings, led by former MTN chief executive Phuthuma Nhleko, wants to convert its portion of the senior debt it holds in AfriSam into equity, a move that could further reduce the shareholdings of Bunker Hills and Holcim, as they would be forced to accommodate the new equity investor.

Worldwide Africa Investment Holdings holds about 37% of AfriSam’s R11 billion senior debt.

Masilela said the conversion of some of this gigantic debt could help lessen the burden on the company.

“Some of the shareholders are creditors of AfriSam who can convert some of the debt into shares, thereby boosting the cash flow of the company.

Another option for restructuring AfriSam’s debt is to replace the current expensive debt with affordable debt,” he said.

Two weeks ago, Stephan Olivier, the chief executive of AfriSam, conceded that tough market conditions had necessitated that the company restructure its debt with senior creditors.

“It is common cause that following the reorganisation that saw a BEE consortium acquire control of the company in 2007, AfriSam is indebted to senior noteholders and other funders.

“The decline in market conditions and profitability over the past few years has made it necessary to restructure the company’s capital and financial arrangements in a holistic manner.

“This could include the refinancing of debt and repayment schedules on a sustainable basis,” Olivier said.

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