JSE-listed construction group Aveng has finalised the terms of the early bond redemption, which is now subject to final shareholder and existing convertible bondholder approval.

Aveng will repurchase R657-million of existing convertible bonds, including accrued interest, for R460-million – 70% of par – from participating bondholders.

“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 previously.

“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.

To fund the specific bond buyback, Aveng will issue a new R460-million debt instrument, which will be underwritten by participating bondholders. The new debt instrument will rank pari passu with the existing bank debt.

All outstanding existing convertible bonds, together with the accrued interest, will be redeemed through a specific issue of Aveng ordinary shares at the rights offer price.

Prior to the specific bond buyback, the principal amount of existing convertible bonds outstanding will be R2-billion, which includes R72.5-million of capitalised interest for the interest period ended July 24, 2018.

The total accrued interest to be paid on the outstanding existing convertible bonds for the interest period started July 24 amounts to R23.55-million, assuming the specific bond buyback and the specific issue take place according to the salient dates.

As such, following the specific bond buyback of R657.15-million, the total amount to be settled by the specific issue is R1.4-billion, resulting in the issue of 14-billion new Aveng shares.

Results of a general meeting of shareholders regarding the matter are anticipated to be announced by September 10.