Aveng was also accelerating its planned disposal of certain non-core businesses, including South African construction business Grinaker-LTA and Trident Steel.
The details of these initiatives were announced by Aveng on Wednesday and followed listed Murray & Roberts (M&R) withdrawing its proposed R1bn all-share acquisition of the group.
Aveng announced the proposed terms of the early bond redemption on Wednesday, in terms of which it plans to redeem R2.1bn in bonds, which includes estimated interest of R30 million.
The plan involves a specific buyback of up to R643m of existing convertible bonds at a price of 70percent of par for up to R450m, the issue of a new debt instrument of up to R450m to participating bondholders and the redemption of all outstanding existing convertible bonds, totalling R1.46bn, through a specific issue of at least 14.59billion Aveng shares at 10c.
The proposed terms of the bond redemption is subject to the approval of shareholders at a general meeting on August 30.
The group stressed its current debt levels were considered to be unsustainable, particularly the existing convertible bonds, and were creating significant constraints on Aveng’s liquidity position.
“It was therefore imperative for Aveng to early redeem the existing convertible bonds to ensure the future sustainability of the company,” it said.
M&R’s withdrawal of its proposed acquisition of Aveng on Wednesday followed German family-owned investment holding firm Aton, which has made a hostile takeover bid for M&R, in July acquiring a 25.42percent stake in Aveng and the ruling by the Takeover Special Committee (TSC) this month overturning on appeal by Aton the approval previously given by the Takeover Regulation Panel (TRP) allowing M&R to continue to develop the potential transaction in parallel with Aton’s mandatory offer for M&R.
The TSC decision prohibited M&R from continuing to develop the potential Aveng transaction while Aton’s offer for M&R remained in place.
M&R said that having considered these developments and its options, its board believed the prospects of successfully implementing the potential transaction were limited.
Following M&R’s withdrawal announcement, Aveng’s group executive of strategy and investor relations Michael Canterbury said the actions announced by Aveng as part of the strategic review in February this year were designed to ensure the sustainability of the group, and the strategy was not reliant on the M&R transaction taking place.
“This is why we have continued to implement Aveng’s strategy even while the M&R transaction was pending,” he said.
Canterbury said that as part of Aveng’s strategic action plan, they successfully raised R493m in new capital from its shareholders in a rights issue and continued to receive good support from all its South African banks.
Canterbury said the key component of this strategy was the disposal of selected non-core assist, including Aveng Grinaker-LTA and the Trident Steel businesses, followed by the manufacturing businesses.
He said the planned completion date of all disposals was June next year. “The board has subsequently decided to accelerate this process as far as possible without unduly impacting the value realised.”
Aveng closed 12.5percent higher at 9c on Wednesday.