Cement producer AfriSam on Tuesday successfully completed a years-long restructuring programme that reduced its overall debt by more than R15-billion.
The group, which faced a significant debt burden and almost defaulted on billions of rand of debt over a year ago, now had a sustainable long-term debt solution to the overgearing that resulted from the acquisition transaction that created AfriSam.
The total debt remaining on the balance sheet could not be confirmed, but previous reports had indicated that it could be about R6.5-billion.
The 2007 deal, incorporating the Public Investment Fund (PIC) on behalf of the Government Employees Pension Fund (GEPF), saw Holcim Switzerland selling 37% of its South African business to black economic-empowerment (BEE) consortium Bunker Hills for a previously reported R15.5-billion.
Holcim retained a 15% stake in the newly formed AfriSam, while construction, steel and cement group Aveng, which held 46% in the initial South African business, sold its stake to Afrisam for a reported R7.4-billion.
To eliminate the debt, which was mostly accrued as South Africa’s second-largest cement maker raised substantial debt with European-denominated floating rate notes (FRNs), the PIC, along with major noteholders and stakeholders, embarked on a debt restructuring process, said CEO Dr Stephan Olivier.
The first phase of the restructuring, which started in January last year, was completed through the settlement of senior debt in February 2012. This was followed by the second phase a few months later. The entire process was initially targeted for completion in August last year.
Following the completion of the restructuring, PIC holds about 66% shareholding in AfriSam, Pembani 30.5%, Holcim 2% and Bunker Hills 1.5%.
As part of the process, the GEPF and black-controlled investment holding company Pembani Group injected a significant – but undisclosed – amount of equity into AfriSam.
The Sandton-based Pembani, established in 1994 as Worldwide African Investment Holdings, contributed its equity through the conversion of FRNs bought in 2011, gaining operational control over AfriSam, while assisting in bringing AfriSam’s debt burden to a manageable and market comfortable level.
The private equity firm, chaired by former MTN CEO Phuthuma Nhleko, declined to disclose the value of the conversions.
The balance of Afrisam’s FRN’s, which the group was unable to redeem on maturation in February 2012, were refinanced with a short-term domestic bridge loan, which was replaced with a long-term debt package during the first quarter of 2013.
Last year, Holcim wrote off some R3.5-billion of AfriSam’s value, while the PIC injected another R3.3-billion into the company. In the prior years, the PIC poured about R6-billion into the cement producer.
AfriSam’s BEE credentials were reportedly maintained throughout the restructure and significant potential job losses were averted. The company employs more than 2 000 people.
Pembani holds numerous investments in mining and industrial companies such as Engen, BHP Energy Coal South Africa and Exxaro.