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Aveng disposes of Trident Steel for R1.2bn, eliminates South African debt

3rd May 2023

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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Infrastructure and resources company Aveng has completed the disposal of steel solutions company Trident Steel for R1.22-billion.

"Post the closing of the sale of Trident, Aveng’s South African legacy debt has been fully extinguished from a previous high of R3.3-billion.

"Specifically, the transaction proceeds have been partially used to fully settle the remaining South African legacy debt of R278-million and to fully settle the Trident Steel short-term trade finance facility of R450-million," the company said.

The purchase price comprised R700-million in purchase consideration, the return of R264-million in net cash to be retained by Aveng, the payment of an accumulated ticking fee of R75-million and the refund to Aveng of R183-million of additional liquidity that was previously provided to the business to fund growth in the period after June 30, 2022.

This resulted in a net cash inflow of R1-billion.

Trident Steel's management have successfully refocused the business into a service centre business primarily focused on the automotive sector, Aveng noted in a May 3 statement.

Further, with Trident Steel being a working capital-intensive business, the transaction has also allowed Aveng to further de-risk its balance sheet by terminating more than R500-million in ancillary trade finance facilities, including foreign exchange, promissory notes and letters of credit.

Since December 2022, Aveng continued to reduce performance guarantees to R136-million.

Aveng in February 2018 announced its strategy to simplify its business, de-risk its balance sheet and reduce its debt. This required Aveng to reduce from 23 business units to five business units and turn around and dispose of noncore assets to allow it to focus on the core assets of McConnell Dowell and Moolmans.

"The completion of the sale of Trident Steel and the settlement of all legacy South African debt marks a pivotal moment in the successful execution of Aveng’s 2018 strategy. This results in the parent company being debt free, removes the substantial working capital requirements of Trident Steel and leaves simplified operations with two operating segments, being McConnell Dowell and Moolmans.

"Having achieved this milestone of de-risking the balance sheet and settling legacy South African debt, management are now entirely focused on the operational performance of Moolmans and McConnell Dowell," Aveng said.

It further noted that Moolmans had successfully secured a new contract at Tshipi é Ntle Manganese Mining and that Aveng had committed to invest about R900-million in new equipment. Asset-backed finance had been secured to fund this investment.

"The equipment is being delivered over an extended period and, to date, Moolmans has recognised R313-million of new debt in respect of this equipment. This asset-backed finance facility has a 48-month term," Aveng said.

Additionally, at the McConnell Dowell subsidiary, following the recent project guarantee call, McConnell Dowell has increased its debt to R406-million, having agreed facilities with its Australian bankers. This debt is expected to reduce by R123-million by June this year, with the balance to be settled by June 2024, it noted.

In response to the announcement that Aveng had completed the disposal of Trident Steel, the group's share price on the JSE rose by more than 10%.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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