By Lynn Bolin
In a move that will avoid the potential collapse of the company, the bankers of struggling technology group MGX (MGX) have agreed to extend the company's 100 million rand term loan facility to October 31, 2003, and have also agreed to a five-year refinancing plan, MGX announced on Wednesday.
This follows the company's failure on Tuesday to repay the loan to a consortium comprising Citibank, SCMB, BoE, Rand Merchant Bank and Investec, due to a lack of cash.
The embattled company saw its chairman and director Peter Flack and director Lindsay Robertson both resign on Tuesday.
Flack cited liquidation as one of the only remaining options for MGX after its creditor banks apparently turned down a proposal to convert existing debt to equity.
However, MGX said on Wednesday its bankers and capital providers had agreed to a five-year refinancing plan, under which the banks will convert approximately 210 million rand of its debt into a range of redeemable convertible instruments, to be issued by an MGX subsidiary.
Another 118 million rand of the company's debt will be converted into redeemable convertible instruments to be issued by MGX.
The remaining debt balance, after the issue of these instruments, amounting to approximately 120 million rand, would then be assumed by the Metrofile Division (Metrofile) of MGX.
Meanwhile, Christopher Seabrooke had agreed to act as Non-Executive Chairman of MGX.
The current team of executive directors, with active assistance from Seabrooke, would be involved in the management of the company until a CEO had been appointed if it was deemed necessary by the board of directors.
The consulting contract of the outside management team from FRM Strategies, brought in to effect a turnaround, expired on June 16 and would not be renewed.
MGX cautioned that the proposed transactions were still subject to the: execution of formal legal agreements; approval of MGX shareholders in general meeting; approval of the JSE Securities Exchange South Africa; approval of the competition authorities; and implementation of schemes of arrangement with creditors in both MGX and Metrofile.
MGX shares were last quoted on the JSE at 19 cents, unchanged from Tuesday's close.
The shares were suspended on Tuesday after plunging 11 cents or 35% to 19 cents on news of the director resignations and the supposed failure of financial restructuring talks.
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