Ann Crotty
Swiss cement producer Holcim has been forced to write off e343 million (R3.5 billion) of debt and interest owed to it by the South African cement and construction materials firm AfriSam.
Shelving the debt is the latest in a series of desperate attempts to prevent the highly geared AfriSam from being forced out of business.
The unexpected announcement about the write-off was made from Holcim’s head office in Switzerland yesterday and comes as AfriSam faced the prospect of defaulting on R12bn of debt repayments due early next month.
Holcim, the world’s second-biggest cement producer, stated that because of the decline in demand for construction material since 2010, “AfriSam found itself forced to initiate additional financial restructuring measures in 2011. Holcim agreed to these measures yesterday after extensive negotiations.”
The agreement, which necessitated the write-offs, is an about-turn by Holcim.
It follows months of efforts by Holcim and the black empowerment company Bunker Hills to block attempts by the Public Investment Corporation (PIC) to restructure AfriSam. Bunker Hills holds a 37 percent equity stake in AfriSam.
The PIC, which has a R10bn equity and debt exposure to AfriSam, has spent months attempting to restructure the company’s balance sheet to ensure it would be in a position to avoid defaulting on its debt repayments.
A key aspect of the proposed restructuring is a bid by the PIC to convert almost R5bn worth of preference shares into AfriSam equity.
This move would see the PIC holding just more than 99 percent of AfriSam and all other shareholders being diluted to a negligible stake.
Holcim, which holds 15 percent of AfriSam, and Bunker Hills opposed the proposed restructuring although such opposition made the prospect of default almost inevitable.
The PIC took the dispute to the high court, which ruled in early December that the state-owned asset manager could convert its debt to equity.
The PIC then secured Competition Tribunal approval for its takeover of AfriSam although both Holcim and Bunker Hills attempted to delay, and then opposed, the proceedings.
The crisis-like conditions that have dogged AfriSam have been described by analysts as inevitable, given the enormous valuation that was attributed to AfriSam at the time of its creation in 2007.
The extremely high valuation combined with the R16bn of debt that was used to fund the introduction of Bunker Hills meant that AfriSam was facing a crippling and growing debt burden from its beginning as a black-empowered company.
This difficult situation deteriorated significantly with the financial crisis that spread across the globe in 2008 and undermined what had been reasonable prospects for the South African construction industry.
In its efforts to rescue AfriSam the PIC has repeatedly stated that its focus was on protecting jobs. But like other parties involved it also stands to lose billions of rands.
In the same announcement yesterday, Holcim added that it was writing off a further Sf360 million (R3.1bn) in relation to underutilised and closed plants in Spain, eastern Europe and the US. page 14