Vernon Wessels and Sikonathi Mantshantsha
Holcim and its South African partner in Afrisam had blocked a proposed conversion of debt into equity, thereby threatening the operations of the country’s second-largest cement maker, the Public Investment Corporation (PIC) said yesterday.
Holcim and its partner, Bunker Hills Investments, were “seeking to better their own interests at the expense of the remaining stakeholders”, Africa’s largest pension fund manager said.
The PIC and former MTN Group chief executive Phuthuma Nhleko are bidding to convert debt they own in Afrisam into shares as interest repayments threaten Afrisam’s ability to continue operating.
Holcim, the world’s second-largest cement producer, created Afrisam in 2006 by selling most of its South African business to black investors led by Bunker Hills.
Holcim and Bunker Hills had failed to honour their contractual obligations by voting against the plan, which would have allowed Afrisam management to issue the ordinary shares required to effect the conversion, the PIC said.
Both Holcim and Bunker Hills were now in breach of the transaction agreements, it said.
But Peter Tshisevhe, a lawyer for Bunker Hills, said the empowerment investment firm would “have been supporting what we believe is an illegitimate transaction” if it had voted in favour of the resolution. “They aren’t entitled to behave in the manner that they did.”
Christof Haessig, a director of Swiss-based Holcim and its representative on the board of Afrisam, did not respond to requests for comment.
Bunker Hills, which owns 37 percent of Afrisam, and Holcim, which retained a 15 percent stake, have said they opposed the debt conversion because it would dilute existing shareholders, including the black economic empowerment (BEE) stake. This could affect its rating.
Bunker Hills funded the acquisition, its only investment, with about R23 billion in debt, which it is struggling to repay after the ongoing recession curbed cement demand in South Africa.
Afrisam management owns 13 percent of the company, while the PIC, which manages R1 trillion in government employee pensions, has 20 percent plus R4.7bn in preference shares. Community trusts own the rest.
Worldwide Africa Investment Holdings, of which Nhleko is chairman, wanted to convert the R3.7bn that it was owed into shares, the Johannesburg-based company said last month.
Further delays might cause Afrisam to enter a process in which it was placed under temporary supervision to avoid claims while it restructured its liabilities, it said.
“Already, these delays are having a negative impact on the operations of the company,” the PIC said, without giving further details. “The PIC will be pursuing all possible remedies to ensure that its rights are honoured.
Tshisevhe said: “The PIC expects Bunker Hills to commit business suicide by supporting the resolution. We’ve been trying to do our level best to act in the interests of the company.”
There was no “trigger event” that allowed the PIC to redeem its debt, added Tshisevhe, declining to give details on what would allow the PIC to take the steps to convert its debt.
Bunker Hills would ask the North Gauteng High Court on November 29 to make permanent an October 31 interim order to prevent the PIC from attaching any Afrisam shares owned by Bunker Hills, Tshisevhe added. – Bloomberg