| Thu 3 Dec 2009, 14:38 | | AGI - AG Industries - AGI restructuring/Renewal Of Cautionary Announcement |
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AGI
AGI
AGI - AG Industries - AGI restructuring/Renewal Of Cautionary Announcement
AG INDUSTRIES LIMITED
("AGI" or "the Company")
(Incorporated in the Republic of South Africa)
Registration number: 1980/004051/06
Share code: AGI & ISIN: ZAE000039467
AG Industries Limited
AGI RESTRUCTURING
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Introduction
AGI has been trading under a cautionary announcement since 8 June 2009, which
was renewed as required on 20 July 2009, 31 August 2009, 30 September 2009 and
11 November 2009. Shareholders have been advised that:
- trading conditions had deteriorated markedly and that this deterioration
had a negative impact on AGI`s operating results and cash flow, resulting
in losses (including impairments) amounting to approximately R296.5 million
in the year ended 30 June 2009;
- given that AGI was already highly geared, this situation created severe
liquidity pressure and discussions between AGI and its bankers resulted in
R25 million of emergency funding being advanced to AGI by its bankers;
- to counter this situation, AGI embarked upon an operational restructuring
programme and at the same time entered into agreements for the sale of
certain non-core assets. These disposals were disclosed to shareholders in
announcements published on 3 September 2009 and 30 September 2009; and
- management`s review showed that the restructuring of operations and the
disposals of non-core assets were unlikely to be sufficient to ensure the
continuation of AGI and its subsidiaries (the "Group") as a going concern
without additional action. In order to ensure the solvency of the Group it
was necessary to introduce fresh equity and reduce debt levels.
It was announced on SENS on 14 October 2009 in the company`s reviewed results
announcement that, as part of the financial restructure programme, AGI had been
in discussions with various capital investors, bankers and other financiers to
reduce the interest-bearing borrowings of the Group, to right-size the Group and
to ensure that the Group had sufficient funding and support from its bankers for
the ensuing year. It is important to note that the restructure programme could
not take place without the continued support of the Group`s bankers, and that
without the restructure programme the Group would not be able to continue as a
going concern.
In this regard the board of AGI are pleased to announce AGI has, on 3 December
2009, concluded an agreement with certain of the lenders to the Group and
Castellas Investment Holdings Limited ("Castellas") in respect of an
underwritten recapitalisation and debt restructuring transaction (the
"Restructuring Agreement").
The recapitalisation of AGI
In terms of the Restructuring Agreement, AGI will undertake a capital raising
exercise in order to raise an amount of R205.6 million by way of a rights offer
("the Rights Offer") in order to reduce the gearing of the Group.
Pursuant to the Rights Offer, 4 112 520 940 newly created ordinary shares
("Rights Offer Shares") will be offered to the shareholders at an issue price of
five cents per Rights Offer Share in the ratio of 20 Rights Offer Shares for
every existing share held on the record date for the Rights Offer, for an
aggregated issue price of R205 626 047. The Company will therefore have 4 318
146 987 shares in issue post the conclusion of the Rights Offer.
Shareholders will be invited to apply for additional Rights Offer Shares over
and above their entitlement. Should there be any additional Rights Offer Shares
available for allocation, the pool of such excess securities will be allocated
equitably, taking into cognisance of the number of securities held by the AGI
securities holder just prior to such allocation, including those taken up as a
result of the Rights Offer, and the number of excess securities applied for by
such AGI securities holder.
The Rights Offer will be made at a price of 5 cents per Rights Offer Share,
which represents a discount of 18 cents to the closing price of 23 cents on 2
December 2009.
The Rights Offer will be fully underwritten by certain of the lenders of the
Group, being ABSA Bank Limited, FirstRand Bank Limited, The Hong Kong and
Shanghai Banking Corporation Limited (Johannesburg branch), Nedbank Limited and
The Standard Bank of South Africa Limited (the "Underwriters").
The Underwriters` obligations to pay the subscription consideration for the
Rights Offer Shares will not be settled in cash but will be discharged by set-
off against their claims against AGI arising from existing overdraft facilities
provided to the Group.
The Underwriters, AGI and Castellas have also entered into a sale and cession
agreement (the "Sale and Cession Agreement"), the execution of which is a
requirement of the Restructuring Agreement. In terms of the Sale and Cession
Agreement the Underwriters will sell and cede to Castellas a portion of the
shares that may accrue to them in terms of their underwriting commitment at
prices ranging from 0,75 cents to 2,0 cents per share as further detailed below.
This equates to a maximum commitment by Castellas (assuming no AGI shareholders
follow their rights) of R45,6 million, equating to a maximum shareholding by
Castellas of approximately 3.15 billion AGI shares (75,2% of the enlarged issued
share capital of AGI) potentially acquired at an average price of 1.4 cents per
share. The Sale and Cession Agreement provides for: (i) Castellas to acquire the
first tranche of Rights Offer Shares not taken up by AGI shareholders pursuant
to the Rights Offer, equating to 25% of the enlarged issued share capital of the
Company at a price of 2 cents per share, (ii) the Underwriters to retain the
second tranche of Rights Offer Shares not taken up by AGI shareholders pursuant
to the Rights Offer, equating to a further 20% of the enlarged issued share
capital of the Company and (iii) Castellas to acquire the remainder of the
Rights Offer Shares not taken up by AGI shareholders pursuant to the Rights
Offer at prices ranging from 0,75 cents to 1,463 cents. Agreement has also been
reached in respect of an agterskot payment from Castellas to the Underwriters of
a maximum amount of approximately 0,7 cents per share acquired by Castellas, and
payable under certain circumstances.
Castellas is a company registered in the British Virgin Islands. It is wholly
owned by a trust established for the benefit of the Imerman family.
Further details of the Restructuring Agreement, the Rights Offer and the Sale
and Cession Agreement will be communicated in a circular and a further
announcement to shareholders to be released in due course.
Irrevocable undertakings
AGI has received irrevocable undertakings, aggregating 63 449 962 ordinary
shares in AGI (equating to 30,36% of the issued share capital of the Company),to
vote in favour of all resolutions required to implement the Rights Offer from
the following shareholders:
- Darter International Incorporated, which has voting control over 40 196 893
ordinary shares in AGI;
- Alexandre Anthony Kerrith Barrell, who has voting control over 1 054 000
ordinary shares in AGI; and
- Alibar Investments (Pty.) Ltd., which has voting control over 22 199 069
ordinary shares in AGI.
Cash proceeds of the Rights Offer
In terms of the Restructuring Agreement, the Group`s existing debt facilities of
approximately R340 million will immediately be reduced to approximately R135
million after the implementation of the underwriting arrangements. Any cash
proceeds received from public subscriptions will be used to reduce the Company`s
existing interest bearing borrowings.
The Underwriters have agreed to enter into a new 12 month committed working
capital facility agreement (secured against the assets of the Group) in the
amount of R130 million, which, taken together with the existing asset finance
facilities of approximately R50 million, would increase the funding available to
the Company by approximately R45 million. In addition, subject to, inter alia,
the requisite approval of shareholders in due course, the Underwriters have
agreed to suspend the requirement to pay or accrue interest on R160 million of
the Group`s existing borrowings from the date on which the last of the
suspensive conditions to the Restructuring Agreement (which are set out below)
is fulfilled, or waived as the case may be, until the date of implementation of
the Restructuring Agreement.
The Board of AGI considers that the recapitalisation of AGI by way of the Rights
Offer, taken together with the operational restructuring programme and the sale
of non-core assets referred to above, will place AGI on a sustainable and
properly capitalised basis.
Suspensive Conditions
The Rights Offer will not be made until the suspensive conditions contained in
the Restructuring Agreement have been fulfilled and/or waived. The
Restructuring Agreement is conditional upon, inter alia:
- the shareholders in general meeting having passed (i) a special resolution
authorising the creation of the Rights Offer Shares, (ii) an ordinary
resolution placing all the authorised but unissued shares in AGI under the
control of the AGI board and authorising the AGI board to issue the Rights
Offer Shares, and (iii) an ordinary resolution waiving the requirement in
terms of Rule 8 of the SRP Code for the Underwriters and/or Castellas and
their concert parties to extend a mandatory offer to the shareholders to
acquire all their AGI shares as a result of the allotment and issue of
Rights Offer Shares to the Underwriters and/or Castellas;
- the special resolution creating the Rights Offer Shares having been
registered by the Registrar of Companies;
- The Securities Regulation Panel having dispensed with the requirement in
terms of Rule 8 of the SRP Code for the Underwriters and/or Castellas and
their concert parties to extend a mandatory offer to the shareholders to
acquire all their AGI shares as a result of the allotment and issue of
Rights Offer Shares to the Underwriters and/or Castellas;
- AGI having obtained written consents for the implementation of the
transactions contemplated in the Restructuring Agreement from third parties
to material contracts of the Group;
- the granting by the JSE of a listing of the Rights Offer Shares and the
letters of allocation to be issued in terms of the Rights Offer;
- the approval of the Sale and Cession Agreement by the South African Reserve
Bank;
- the registration by the Registrar of Companies of all documents required in
respect of the Rights Offer; and
- such regulatory and other approvals, including but not limited to
competition approval, as may be required.
Renewal of cautionary announcement
The detailed terms of the general meeting to be called for the purposes of
passing the necessary shareholders resolutions will be communicated in a
circular and a further announcement to shareholders, which will be released in
due course.
The full terms, financial effects and salient dates of the Rights Offer will
also be announced to shareholders in due course and a circular will be sent to
shareholders once approved by the relevant authorities. Until such announcement
has been made, shareholders are advised to continue to exercise caution in
dealing in their AGI shares.
Directors: RJ Douglas+ (CEO), MJE Geldenhuys (Financial), JC Saville,
HR Levin* (Non-Executive Chairman), AA Barrell* (Deputy Non-Executive
Chairman), BE Danoher*#+, HF Brown*+, J Martingano*
*Non-Executive #Irish +Independent +British
Registered office
Corner Kruger Street and Mimetes Road, Denver Extension 11, Johannesburg
2094
PO Box 40443, Cleveland 2022
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107,
South Africa
www.ag-industries.com
Johannesburg
3 December 2009
Transaction Sponsor
KPMG Services (Proprietary) Limited
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
Attorneys
To the Underwriters: Webber Wentzel
To Castellas: Bowman Gilfillan
To AGI HR Levin
Corporate Advisor: Favim Investments
Date: 03/12/2009 14:38:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
