File image: IOL.
File image: IOL.

Aveng in R1.8bn rights offer

By Roy Cokayne Time of article published Apr 30, 2018

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JOHANNESBURG -Troubled listed construction and engineering group Aveng intends to implement a R1.8 billion rights offer to raise the capital needed to fund the early redemption of a portion of its existing convertible bonds of R2bn and inject R300 million in new capital into the business.

The proposed rights offer equates to about three times the current market capitalisation of Aveng.

Aveng said last week that it had gross debt of R3.25bn at end-December, including bank debt of R1.25bn and the existing convertible bonds of R2bn.

To date it had used a further R350m of bank debt and expected to use a further R200m bank debt, subject to bank approval, increasing its total bank debt to R1.8bn.

Aveng said these current debt levels were unsustainable and that deleveraging the company to reduce the existing debt burden was critical to unlocking shareholder value.

Eric Diack, the executive chairman of Aveng, said the proposed transaction would remove the refinance risk related to the existing convertible bonds and assist in restructuring the group’s balance sheet to a more appropriate and sustainable level.

“In parallel with the proposed transaction, Aveng is continuously evaluating alternative opportunities to maximise cash flows and unlock value for all Aveng stakeholders.

“The company will continue to responsibly pursue the sale of non-core assets, which was announced as an outcome of the strategic review, and will consider any other viable alternatives available to the company,” he said.

Aveng said the proposed transaction supported the going concern of the group, protected Aveng shareholder value and recapitalised the business to allow for future growth.

The group said its board had considered alternatives for the potential refinancing of the existing convertible bonds prior to their maturity but, in addition to the difficult trading conditions the company had been facing, believed that uncertainty about the group’s ability to refinance these bonds had contributed to the decline in the Aveng share price over recent months.

Given the prevailing situation, it was highly unlikely its share price would exceed the conversion price of R28.76 before the final maturity of the convertible bond instrument, it said.

Aveng’s closing share price on the JSE on April 26 was R1.01.

The group said that as such, the existing convertible bondholders would be unable to exercise their conversion rights and the company would, as it stands, be required to redeem all the outstanding existing convertible bonds at their nominal amount on the final maturity date of July 24, 2019.

The group said it was expected the early bond redemption would be settled through a combination of cash from the proposed rights offer and Aveng shares.

It would use the proceeds from the proposed rights offer to redeem a portion of the existing convertible bonds, with the balance of these bonds settled by the issue of shares as a specific issue of shares for cash.


This would require approval from independent Aveng shareholders representing 75% of the shareholders present and voting, it said.

Shareholder approval would also be required to grant directors the authority to issue Aveng shares representing more than 30% of the issued share capital of the group.

Aveng said it understood this required a substantial commitment from existing shareholders.

Should Aveng shareholders decide not to fully follow their rights in terms of the proposed rights offer, existing bondholders would convert their existing bond holding to equity through the bond share redemption, subject to the existing convertible bond terms and conditions being amended and approved.

Aveng said a general meeting of shareholders would be held on May 29 to pass the resolutions required to increase the authorised share capital of the group, while the terms of the proposed rights offer would be announced soon.


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