https://www.miningweekly.com

Highveld creditors seek more details on alternative offer as rescue vote is postponed

28th September 2015

By: Terence Creamer

Creamer Media Editor

  

Font size: - +

Creditors agreed unanimously on Monday to postpone, for two weeks, a vote on the business rescue plan developed for Evraz Highveld Steel and Vanadium, while raising questions about the preferred bidder’s commitment to South African suppliers and whether an alternative bid, which had been rejected, should not also be considered.

The rescue plan, which was published on September 16, included a R405-million buyout offer from International Resources Limited (IRL), of Hong Kong, including an interlinked offer for the Mapochs mine, which supplies iron-ore to the Mpumalanga steel mill, but which was undergoing a separate business rescue process.

The plan had been endorsed by both government and labour, with National Union of Metalworkers of South Africa general-secretary Irvin Jim telling a well attended meeting in Sandton that the plan offered a “serious prospect to win the day and turn around what looked like a very bleak picture”.

Creditors, nevertheless, concurred with an adjournment motion – placed before the meeting by Evraz subsidiaries Mastercroft, Highveld’s largest shareholder, and East Metals, its single largest creditor – on the basis that it would provide more time to get to grips with the implications of the plan and IRL’s offer.

Particular concern was raised about whether IRL would continue to engage with Highveld’s traditional supplier base on the completion of the transaction. Fears were expressed that, despite the role that creditors were playing in rescuing the business, South African suppliers could be replaced by Chinese competitors.

The IRL offer, which was submitted on August 28, had been broken into two scenarios: a sale by means of a scheme of arrangement, and the sale of the business as a going concern. Should creditors accept neither, there was a further option to wind down the company.

Under the first two scenarios, R350-million had been set aside for creditors and R150-million to settle an emergency loan provided by Industrial Development Corporation at the start of the rescue process.

Under the scheme offer, IRL would also pay R20-million to buy all of the issued shares in the company, a component that was absent for the purchase of the business as a going concern.

However, even if no new tax liabilities emerged, the creditors would only receive between 15c and 29c in every rand owed to them. This could be materially diluted should the South African Revenue Service raise an assessment in relation to a dispute over the imputation of the net income of Highveld’s controlled foreign company, Hochvanadium Handels, in Austria. The capital liability could be R400-million, before interests and penalties.

Creditors, therefore, questioned whether the business rescue practitioners had acted correctly in rejecting an alternative bid from Global Renewable Energy (GRE), a company incorporated in the Isle of Man, which promised creditors 100c in every rand.

GRE unsuccessfully sought an interdict on September 25 to prevent the creditors from voting on the plan until GRE’s final binding offer had been placed before Highveld’s creditors.

Speaking from the floor, GRE’s representative Connie Myburgh, said the entire creditor community, and not only the creditor committee, should be allowed to consider its bid, even though “I know it sounds too good to be true”.

“We have advised the practitioners that our bid is in place, has not been withdrawn and will not be withdrawn,” Myburgh added, noting that it was keeping its legal options open.

But business rescue practitioners Piers Marsden said he and Daniel Terblanche had agreed that the GRE offer had sounded appealing at first blush. “But when you are offering north of R5-billion and are unable to bring $10-million into the country on a no-risk, return-as-willed basis, one questions the veracity of the offer.”

Despite extensive engagements with GRE, Marsden said he was still unable to disclose to creditors “who the principals of GRE are”, noting that the “purported guarantee” was provided through a bank in Saint Lucia, in the Caribbean.

“The process letter says that, if we are unhappy with your guarantee, you need to give us a different one. We have given them [GRE] six to eight weeks opportunity to bring cash into the country to demonstrate their bona fides,” Marsden said.

However, he committed to distributing to creditors all the affidavits arising from the High Court application, which was not heard on its merits and rejected on the basis that the judge did not consider it urgent.

Meanwhile, Marsden said that, while he had already raised the issue of local procurement with IRL, he would use the coming weeks to secure a firmer commitment on the matter.

He stressed, however, that Highveld could not be bound to onerous contracts, as the future sustainability of the business would hinge on it securing goods and services at competitive prices.

Trade union Solidarity said that measures should be put in place to ensure continued support for South African service suppliers and products. “It is important for us that South African service providers would still be used and that South African products would still be supported by the company,” metal and engineering industry head Marius Croucamp said.

The next meeting to vote on the rescue plan was likely to be held in eMalahleni.

Edited by Creamer Media Reporter

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION