Evraz Highveld Steel and Vanadium (Highveld) creditors on Tuesday voted in favour of a business rescue plan, which includes a buy-out offer from International Resources Limited (IRL), of Hong Kong, China.
The vote, attended by some 300 people, took place at a hall on the steel producer’s Emalahleni site in Mpumalanga.
The plan, which was proposed in mid-September by Highveld’s business rescue practitioners (BRPs), Piers Marsden and Daniel Terblanche, had also received the backing of both government and labour.
“This is a great result for all Highveld stakeholders including creditors, shareholders, employees, suppliers and the community as a whole,” Marsden said following the vote. “The vast majority of creditors voting in favour of the business rescue plan has ensured that Highveld has successfully avoided liquidation,” he added.
The plan had also been amended to include preferential treatment for existing Highveld suppliers should the IRL offer be finalised as anticipated during the first half of 2016.
In addition the business rescue plan provided for a controlled wind down should the IRL offer not be consummated, which Marsden described as a “significantly better result than liquidation”. Highveld CEO Johan Burger said this back-up plan could possibly involved toll rolling activities and the leasing of the furnaces and kilns to ferroalloy producers.
However, the plan was not universally endorsed, with a rival bidder, Global Renewable Energy (GRE), having already contested it legally.
GRE had sought an urgent court interdict preventing the vote from taking place until its offer had been placed directly before creditors. Its application was set aside, with costs, for lacking urgency, but it was still possible that GRE would seek to have the matter heard on its merits.
Should the IRL transaction be concluded, creditors would receive R350-million, which represented between 15c and 29c in every rand owed to them, depending on the final claims adjudication outcome. It could also be negatively affected should the South African Revenue Service raise an assessment against the company.
GRE claimed it could service all creditor debt, but was disqualified by the BRPs when it failed to provide a $10-million refundable deposit to gain access to the virtual data room and complete a due diligence.
Burger told Engineering News Online that, while the IRL offer was not perfect, it nevertheless represented the most “viable” offer available. But he stressed that there were still some major outstanding conditions precedent, including reaching an agreement with the environmental authorities to enable the mill to restart operations notwithstanding compliance challenges.
The deal would also depend on the cancellation of certain onerous contracts and further tariff protection on the structural steel grades produced at Highveld.
The deal was also conditional on creditor support for an interlinked business rescue plan at the Mapochs mine, which provided the mill with its source of iron-ore. That plan would be published this week, with a vote to follow ten days thereafter.
Burger said downsizing negotiations with labour were also well advanced, with some 200 employees having already taken up voluntary severance packages, reducing the headcount to around 1 850 people.
A further 780 employees faced the prospect of retrenchment and applications were under way to ensure that these individuals participated in a training layoff programme. It was anticipated that, should the IRL deal be consummated, 1 180 people would be retained.
Trade union Solidarity welcomed the acceptance by creditors of the rescue plan, with metal industry head Marius Croucamp describing it as “the best possible way out”, under the circumstances, for the company and its employees.
“We’ll assist International Resources Limited to the best of our ability in their attempt to save Highveld Steel. The survival of the company, as well as our members’ job security remain our first priority,” he said, noting that the union had 350 members at the company.
The National Union of Metalworkers of South Africa (Numsa), meanwhile, called on government to set up a high-level steel crisis committee comprising representatives from government, labour and industry.
“This committee must develop short- and long-term interventions to stem the current crisis and must develop strategies for ameliorating the impact of the crisis on workers as well as develop strategies for future sustainability. This must include setting up of survival support mechanisms for the workers who will lose their jobs imminently.”
Numsa also urged government to stipulate, or designate, the used of locally made steel in infrastructure projects, accelerate the roll-out of the infrastructure programme, finalise a country-level beneficiation strategy, ban scrap steel exports and ensure that domestic steel was sold at a fair rather than an import-parity price.