PIC to restructure debt at AfriSam

The Public Investment Corporation (PIC), the government pension fund manager, now holds about 99% of the equity in SA’s second-largest cement maker, AfriSam, with the PIC having exercised its right to turn R4,7bn of debt into equity, while retaining the black economic empowerment status of the company.

In doing so, the PIC has finally obtained shareholder approval for the deal, after negotiations among stakeholders going back to 2009. "The implementation of the restructuring, as contemplated in the … agreement, will result in a significant reduction of debt, to approximately R6,5bn, a debt reduction in excess of R15bn," the PIC said yesterday.

The PIC said after the debt restructuring of more than R20bn was complete, it would hold about 57% of AfriSam on behalf of the Government Employees Pension Fund. It said the fund’s investment qualified it as a black economic empowerment facilitator in terms of the act. The fund would not be the only major creditor to AfriSam.

"The intention is for local banks to participate in the largest portion by subscribing to the R5bn term debt," PIC CEO Elias Masilela said yesterday.

In addition to getting parties to agree to the restructuring, the PIC negotiated a domestic debt facility to bring the debt onshore, reducing exchange rate risk, and lowering the interest rate burden.

The PIC and Pembani, a vehicle chaired by former MTN CEO Phuthuma Nhleko, which will convert R3,7bn of its own AfriSam debt into equity, will jointly control the company.

It said Bunker Hills Investments and Swiss cement maker Holcim — which formed AfriSam in 2006 by selling 37% to black economic empowerment interests led by Bunker Hills, while retaining a 15% stake — would hold minority interests, including an option to increase their position.

Bunker Hills and Holcim now hold about 1% of AfriSam. But in a restructured company, the PIC said this would be about 1,5%, and could increase.

Mr Masilela said no public money, in the form of government bail-outs, was involved.

Holcim and Bunker Hills had earlier opposed the PIC converting its debt to equity, claiming that their share in AfriSam would be diluted to "almost nothing", despite a court sanctioning the PIC to do so.

On Monday, Holcim said it would write off €343m of its debt in AfriSam, retaining a 2% stake, after Bunker Hills had earlier agreed to a restructuring.

Before the deal was finally struck, the PIC implied Holcim may have misled its European shareholders over the magnitude of AfriSam’s debt, and the value of its stake in the company, even going so far as to accuse the pension fund manager of "nationalising" the company.

"We regret that certain assertions intimating nationalisation have been made. Given how far we have gone, we have chosen to put this behind us, in the spirit of the agreement we have now reached," Mr Masilela said.