Aveng asks shareholders for leap of faith

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Aveng asks shareholders for leap of faith

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Published Date: 2018-04-30 | Source: Stephen Gunnion | Author: Stephen Gunnion

Aveng asks shareholders for leap of faith

The embattled construction group is proposing a R1.8 billion rights offer - more than four times its current market value

Aveng plans to ask shareholders to support a R1.8 billion rights offer as it struggles with a debt burden it describes as unsustainable. The construction group says its R2 billion, 7.25% convertible bonds, in particular, are creating significant constraints on its capital structure, hindering its effort to unlock value for shareholders.

Its shares fell 21% to R1.01 on Thursday, valuing the group at about R421 million. Aveng used to be the country's largest construction group and was on the JSE's Top 40 index.

"Aveng understands that this is a substantial commitment required from existing Aveng shareholders," the company said in a statement.

The group plans to keep R300 million of the rights offer proceeds for internal capital requirements. The balance will be used to redeem a portion of the existing convertible bonds on a pro-rata basis. It will settle the balance of the Early Bond Redemption through the issue of new Aveng shares to bondholders or through a combination of new Aveng shares and new debt instrument. Bond investors that aren't permitted to hold equity will also take up the new debt instrument.

Apart from the R2 billion in convertible bonds, Aveng owes banks a further R1.25 billion. It says it has utilised a further R350 million of bank debt and expect to use another R200 million if it can get it. That would take bank debt to R1.8 billion.

"As such, deleveraging the company to reduce the existing debt burden will be critical to unlocking shareholder value," it said. "In particular, Aveng's existing convertible bonds are creating significant constraints on Aveng's capital structure.

Should Aveng shareholders decide not to follow their rights in terms of the proposed rights offer, existing convertible bondholders will convert their existing convertible bondholding to equity through the Bond Share Redemption. To do that Aveng said the existing convertible bond terms and conditions would have to be amended and approved at a special bondholder meeting.

As part of a strategic review announced with its interim results in February, Aveng announced it would dispose of its non-core assets including Aveng Grinaker-LTA, Aveng Trident Steel, the Aveng Manufacturing businesses and properties. This would leave it focused on the core operations of Moolmans and McConnell Dowell. It says the implementation of the strategic review will take up to three years.



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