Aveng, the construction and open cut contract mining group at the tail-end of a long turnaround, said yesterday that all conditions had been met for the R1.22 billion sale of its Trident Steel subsidiary, a deal that finally extinguishes the last of the group’s legacy debt.
Aveng announced a strategy in February 2018 to simplify its business, de-risk its balance sheet and reduce its debt. This required it to reduce from 23 business units to five business units, and turn around and dispose of non-core assets to allow it to focus on the core assets of McConnell Dowell and Moolmans.
The disposal results in the parent company being debt-free, removes the substantial working capital requirements of Trident Steel and leaves simplified operations with two operating segments, being McConnell Dowell and Moolmans.
Post the closing of the sale of Trident, Aveng would be debt-free from a previous high of R3.3bn, as the transaction proceeds would be partially used to fully settle the remaining South African legacy debt of R278 million and to settle the Trident Steel short-term trade finance facility of R450m.
The disposal also allowed Aveng to further de-risk its balance sheet by terminating over R500m in ancillary trade finance facilities including foreign exchange, promissory notes and letters of credit.
“Having achieved this milestone of de-risking the balance sheet and settling legacy South African debt, management are now entirely focused on the operational performance of both Moolmans and McConnell Dowell,” the group said in a statement yesterday.
Aveng’s share price surged 4.77% to R10.99 on the JSE yesterday afternoon.
Total cash inflow to the group from the deal comprised R700m in purchase consideration, the return of R264m cash to be retained by Aveng, the payment of a ticking fee equal to R75m and the refund to Aveng of R183m of additional liquidity previously provided to the business to fund growth in the period after June 30, 2022.
As part of the deal, Aveng would provide a R210m loan, to a separate company, in order to subscribe for 30% in the equity of the business that was reserved for BBBEE participation.
Aveng’s board said in a statement that Trident Steel’s management had successfully refocused the business into a service centre business primarily focused on the automotive sector, improving profitability and returns and well-positioned for further growth.
At the Moolmans subsidiary, having successfully secured a new contract at Tshipi é Ntle, Moolmans plan to invest R900m in new equipment. Asset-backed finance had been secured to fund this. The equipment was being delivered over an extended period and, to date,Moolmans had recognised R313m of new debt for this equipment.
At the McConnell Dowell subsidiary, following the recent project guarantee call, McConnell Dowell had increased its debt to R406m (A$33m), having agreed facilities with its Australian bankers. This debt was expected to reduce by R123m by June 2023, with the balance to be settled by June 2024.