News
Infrastructure and contract mining group Aveng has expressed confidence that its recently unveiled debt restructure and recapitalisation plan will provide the “reset” required for its two remaining core businesses, McConnell Dowell and Moolmans, to begin growing again, with the Australasian region poised to be the main driver of that growth. The JSE-listed company, which reported a headline loss of R950-million for its pandemic-affected 2020 financial year compared with a R1.5-billion loss in 2019, is at the tail-end of a far-reaching restructuring exercise, initiated in 2017 when its debt burden became unsustainable. Besides the disposal of noncore businesses, including the Grinaker-LTA construction business with which it was hitherto synonymous, the restructuring has involved a series of debt and equity transactions designed to place the company on a sound financial footing. To date, most of the 14 noncore units have been sold, with only Trident Steel, Automation & Control Solutions and Infraset still remaining. These disposal processes were disrupted by South Africa’s Covid-19 lockdown, but are all progressing again, with four potential buyers lining up to compete for Trident. CEO Sean Flanagan reports that management attention has turned to implementing the latest restructure and recapitalisation plan, announced on November 25, which he said would be a “watershed” for ensuring that the group‘s capital structure could, at last, provide the platform for the execution of a growth strategy. Under the multi-part transaction, which should be finalised by the end of February, Aveng aims to increase its stated capital by R700-million, while reducing its debt and overdraft facility from R2.1-billion to R1.1-billion. An in-principle agreement had already been secured with its largest shareholder, Highbridge Capital Management, to underwrite a 1.5c a share rights offer to introduce a minimum of R300-million of new capital into the business. Aveng’s share price was trading at 3c on the last day of November. The group’s stated capital could also be increased by an additional R400-million by settling debt by way of the issuance of new ordinary shares at 5c a share. CFO Adrian Macartney tells Engineering News that Highbridge Capital Management, which holds 19.9% of Aveng, was approached using the ‘wall-crossing’ practice, whereby a transaction can be discussed with a shareholder with the proviso that the shareholder is restricted from dealing in the shares or acting on the information provided. Aveng intends approaching other shareholders with the same offer in the coming weeks and may consider an “upsizing” of the rights issue thereafter. Macartney reports that a decision on any upsizing would be taken prior to the issuance of a circular on the transaction, while the scale of the upsizing would depend on shareholder appetite for the offer. Besides Highbridge Capital Management, one other shareholder has already indicated that it too will be taking up the offer. The transaction still requires shareholder approval. Unless the uptake is significantly higher than the R300-million assumed, however, the rights issue is unlikely to affect the debt-restructuring portion of the transaction, through which Aveng intends deleveraging its balance sheet by more than R1-billion. The debt-reduction portion of the transaction involves an early settlement of R660-million-worth of debt for R210-million in cash and the extension of the group’s South African lender debt maturity to December 2023. Flanagan tells Engineering News that, besides alleviating a long-standing debt constraint, the transaction will also materially reduce its interest charges, which will release funds for project bonds required by McConnell Dowell and for the purchase of mining equipment by Moolmans. “Therefore, it’s a significant event for us, as we now have a significantly stronger balance sheet from which we can grow the business,” he says. A...