Aveng announces early bond redemption and R1.8bn rights issue

30th April 2018

By: Anine Kilian

Contributing Editor Online

     

Font size: - +

JSE-listed construction group Aveng will implement a R1.8-billion rights offer to raise the capital needed to fund the early redemption of a portion of its existing convertible bonds of R2-billion.

The rights offer will also add R300-million in new capital into the business.

Aveng intends to retain a portion of the proceeds to fund internal capital requirements. The balance of the proceeds raised will be used to redeem a portion of the existing convertible bonds from existing convertible bondholders on a pro rata basis.

“The proposed transaction will remove the refinance risk related to the existing convertible bonds and assist in restructuring the group’s balance sheet to a more appropriate and sustainable level, chairperson Eric Diack said.

As at December 31, 2017, Aveng had gross debt of R3.25-billion, including bank debt of R1.25-billion.

“These current debt levels are unsustainable and deleveraging the company to reduce the existing debt burden is critical to unlocking shareholder value. Aveng’s existing convertible bonds are creating significant constraints on the company’s capital structure,” he stated.

The proposed rights offer equates to about three times the current market capitalisation of Aveng.

The proposed rights offer will be conditional on shareholder approval. Additionally, shareholder approval will be required to grant directors authority to issue Aveng shares representing more than 30% of the issued share capital of Aveng.

Given the prevailing situation, it is highly unlikely that the Aveng share price will exceed the conversion price of R28.76 before the final maturity of the convertible bond instrument.

As such, the existing convertible bondholders will be unable to exercise their conversion rights. As it stands, the company will be required to redeem all the outstanding existing convertible bonds at their nominal amount on their final maturity date of July 24, 2019.

It is expected that the early bond redemption will be settled through a combination of cash from a proposed rights offer and Aveng shares.

The company, which posted a headline loss of R335-million for the half-year ended December 31, in March outlined details of the outcome of its strategic review, which involved a “very thorough and robust interrogation” of all parts of the business.

The review was aimed at identifying the businesses and assets that were core to the group and which supported its overall long-term strategy, determining the most appropriate operating structure, as well as identifying a sustainable future capital and funding model.

The six-pillar plan is focused on simplifying, reshaping, growing, disposing of certain assets, deleveraging and unblocking shareholder value within the business.

“The plan will reduce complexity by optimising the group’s portfolio and focusing on growing core operations with the group’s strong management teams and unique value offerings in infrastructure companies McConnell Dowell and Moolmans,” Diack said.

He added that the outcomes of the strategic review had reaffirmed management’s intention to ensure that both Aveng Trident Steel and Aveng Grinaker-LTA were acquired by new shareholders better positioned to compete successfully in the South African marketplace.

A further outcome of the strategic review is the decision to exit the Aveng manufacturing businesses, which will position these individual businesses to compete more effectively.

These disposals will reduce the group’s overall exposure to bonding and guarantee lines and will result in lower working capital requirements for the group.

Edited by Creamer Media Reporter

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION