| Fri 28 Nov 2003, 12:20 | | Mgx Holdings Limited - Debt Refinancing Of Mgx And |
|
Mgx Holdings Limited - Debt Refinancing Of Mgx And Scheme Of Arrangement
Release Date: 27/11/2003 08:30:01 Code(s): MGX
MGX Holdings Limited - DEBT REFINANCING OF MGX AND SCHEME OF ARRANGEMENT
MGX Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1983/012697/06)
Share code: MGX ISIN: ZAE000009262
("MGX" or "the Company")
THE DEBT REFINANCING OF MGX, A SCHEME OF ARRANGEMENT WITH CONCURRENT CREDITORS
IN TERMS OF SECTION 311 OF THE COMPANIES ACT, 1973 (ACT 61 OF 1973), AS AMENDED
AND A CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
The board of directors ("the board") of MGX is pleased to announce that
agreements have been reached with:
* Citibank N.A., South Africa Branch;
* The Standard Bank of South Africa Limited;
* Momentum Group Limited;
* Nedbank Limited;
* Investec Bank Limited;
* Capital Africa Limited;
* Drive Control Services (Proprietary) Limited;
* Eurevest Leasing (Proprietary) Limited ("Eurevest"); and
* the Trustees for the Time Being of the South African Private Equity Trust III,
(collectively, "the Capital Providers") to refinance the interest-bearing debt
of MGX ("the debt refinancing").
In addition, the board intends to propose a scheme of arrangement in terms of
section 311 of the Companies Act, 1973 (Act 61 of 1973), as amended ("the
Companies Act"), with creditors of MGX who have claims against the Company,
whether liquidated or unliquidated, actual or contingent ("the scheme
creditors"), which will result in the claims of the scheme creditors being
settled by way of a compromise under the scheme ("the scheme"), with scheme
creditors receiving interest-bearing redeemable convertible loan notes to be
issued by MGX ("the Notes") in amounts equal to the face value of the scheme
creditors" claims in settlement of such claims against MGX.
2. RATIONALE FOR THE DEBT REFINANCING
In December 2002, MGX embarked on a recovery plan, with the support of the
Capital Providers, in terms of which the Company decided to:
* dispose of certain operating subsidiaries and commercial properties and use
the proceeds of these disposals to reduce the interest-bearing debt of the
Company ("the disposals");
* refinance the interest-bearing debt of the Company to a position which can be
sustained by the remaining operations in the MGX group;
* create a structure for the capitalisation of the remaining interest-bearing
debt of the Company, to the extent that the debt is not repaid over a five-year
period, thereby avoiding an immediate dilution to MGX shareholders and creating
the opportunity for MGX to repay the debt; and
* create a smaller group which can be rebuilt over a period of two to three
years into a profitable business after the refinancing of the Company"s interest
bearing debt.
The total purchase consideration received by MGX for the disposals has been
used by the Company to reduce its interest-bearing debt with the Capital
Providers from approximately R600 million to approximately R400 million.
After the disposals, the remaining operating business in the MGX group will be
the Metrofile division, comprising:
* Metrofile (Proprietary) Limited;
* MGX Customer Services (Proprietary) Limited;
* MGX Outsourcing (Proprietary) Limited;
* Mail Processing Systems (Proprietary) Limited;
* Document and Data Management (Africa) (Proprietary) Limited;
* Metrofile Natal (Proprietary) Limited;
* Metrofile Cape (Proprietary) Limited;
* The Paper Bank Marketing Company (Proprietary) Limited; and
* Stuttaford Archive Services (Proprietary) Limited,
(collectively, "Metrofile"), which is involved in document and records
management.
Once the debt refinancing, the scheme and the remaining disposals have been
implemented, the Metrofile business will be the only remaining business within
the MGX group. Metrofile is a business that produces sound and regular cash
flows and has excellent growth opportunities and is in a financial position to
sustain the debt that is required to be serviced in terms of the debt
refinancing.
3. IMPORTANT DETAILS OF THE DEBT REFINANCING
The domestic interest-bearing debt of approximately R400 million, remaining
after the disposals, will be refinanced as follows:
* MGX and Metrofile will dispose of the assets and liabilities of Metrofile, as
a going concern, to Main Street 152 (Proprietary) Limited ("Main Street"), a
wholly owned subsidiary of MGX and a special purpose vehicle created to
facilitate the debt refinancing, in terms of section 228 of the Companies Act
for a purchase consideration of R305 million ("the purchase consideration")
("the Metrofile disposal");
* Main Street will raise debt from certain of the Capital Providers to fund the
purchase consideration on the following basis:
- approximately R106 million in interest-bearing senior term debt ("the
Metrofile A facility");
- a short-term working capital facility of R10 million ("the Working Capital
facility");
- a redeemable convertible loan of approximately R112 million ("the Metrofile B
facility");
- a redeemable convertible loan of approximately R77 million ("the Metrofile C
facility"),
(collectively, "the disposal loans");
* Main Street will raise an additional redeemable convertible loan of
approximately R20 million ("Metrofile B1 facility") (collectively with the
disposal loans, "the Metrofile facilities");
* Main Street will pay the R305 million purchase consideration for the assets
and liabilities of Metrofile to Metrofile;
* Metrofile will pay an amount of R305 million to MGX in the form of a dividend
and the repayment of inter-company loans;
* Metrofile will be voluntarily wound-up by MGX in terms of sections 349 and 350
of the Companies Act;
* the Metrofile disposal will take place under the intra-group provisions of the
South African Income Tax Act, 58 of 1962, as amended;
* MGX will settle R305 million of its domestic interest-bearing debt with the
funds received from Metrofile; and
* within MGX:
- certain concurrent creditors will have their claims to the value of
approximately R65 million compromised in terms of the scheme and will receive
the Notes; and
- other non-trade creditors, with claims to the value of approximately R20
million against MGX, will convert their claims into redeemable convertible loans
of R20 million ("the MGX B facility").
Security for the Metrofile facilities, the MGX B facility and the Notes, will
be provided by Micawber 305 (Proprietary) Limited ("the Guarantor"), a special
purpose vehicle created to facilitate a security mechanism for the Capital
Providers, in the form of guarantees issued to the Capital Providers and to the
holders of the Notes ("the security"). The Guarantor will hold the underlying
assets of Main Street and MGX as security for its obligations under the
guarantees provided by it to the Capital Providers.
4. IMPORTANT TERMS AND CONDITIONS OF THE DEBT REFINANCING
The important terms and conditions of the debt refinancing are set out below.
4.1 The important terms and conditions of the Metrofile facilities
The important terms and conditions of the Metrofile facilities are set out
below.
4.1.1 The Metrofile A facility
The Metrofile A facility will:
* be a five year senior loan facility made available to Main Street in the
amount of R106 million;
* be paid down to R80 million by MGX in terms of a fixed repayment schedule; and
* accrue interest at the prime rate minus 1%, which interest will be capitalised
on a nominal annual compounded quarterly ("nacq") basis.
The Metrofile A facility lenders will have the first right of recourse to the
security, together with the providers of the Working Capital facility referred
to in paragraph 4.1.2.
4.1.2 The Working Capital facility
The Working Capital facility will:
* be a revolving working capital facility made available to Main Street in the
amount of R10 million;
* accrue interest at the prime rate minus 1%, which interest will be capitalised
on a nacq basis;
* be repaid in full on the earlier of 12 months after the date on which the
facility is advanced or the date upon which the Metrofile A facility reaches a
level of R80 million; and
* rank pari passu with the Metrofile A facility as regards access to the
security.
4.1.3 The Metrofile B facility
The Metrofile B facility will:
* be a five year credit facility made available to Main Street in the amount of
approximately R112 million;
* accrue interest at the prime rate, which interest will be capitalised on a
nacq basis;
* be repayable from the excess cash flows of Main Street after the Working
Capital facility has been repaid and the Metrofile A facility has been reduced
to R80 million; and
* be secured by a second right of access to the security and rank pari passu
with the rights of the Metrofile B1 facility.
The balance of the Metrofile B facility, inclusive of accrued and capitalised
interest outstanding, will be convertible, at the election of the lenders of the
Metrofile B facility and the Metrofile B1 facility, into Main Street shares on:
* the happening of certain default events; or
* the final date for repayment of the Metrofile B facility.
4.1.4 The Metrofile B1 facility
The Metrofile B1 facility will:
* be a five year credit facility made available to Main Street in the amount of
approximately R20 million;
* accrue interest at the prime rate, which interest will be capitalised on a
nacq basis;
* be repayable from the excess cash flows of Main Street after the Working
Capital facility has been repaid and the Metrofile A facility has been reduced
to R80 million;
* be secured by a second right of access to the security and rank pari passu
with the rights of the lenders of the Metrofile B facility; and
* be conditional on obtaining exchange control approval from the South African
Reserve Bank.
The balance of the Metrofile B1 facility, inclusive of accrued and capitalised
interest outstanding, will be convertible, at the election of the lenders of the
Metrofile B1 facility and the Metrofile B Facility, into Main Street shares on:
* the happening of certain default events; or
* the final date for repayment of the Metrofile B1 facility.
4.1.5 The Metrofile C facility
The Metrofile C facility will:
* be a five year credit facility made available to Main Street in the amount of
approximately R77 million;
* accrue interest at the prime rate plus 2%, which interest will be capitalised
on a nacq basis;
* be repayable from the excess cash flows of Main Street after the settlement of
the capital and interest of the Metrofile B facility and the Metrofile B1
facility; and
* be secured by a third right of access to the security.
The balance of the Metrofile C facility outstanding, inclusive of accrued and
capitalised interest will:
* automatically convert into Main Street shares, on the final repayment date of
the Metrofile C facility; or
* automatically convert into Main Street shares, if the Metrofile B facility and
the Metrofile B1 facility convert at any time.
In addition, on the happening of certain default events, the Metrofile C
facility will be convertible, at the election of the lenders of the Metrofile C
facility, into Main Street shares, if the Metrofile B facility does not convert
into Main Street shares.
4.1.6 The conversion of the Metrofile facilities
In the event that there is a conversion of any of the Metrofile facilities,
such facilities will convert into all of the issued share capital of Main Street
owned by MGX.
4.2 Conditions precedent to the debt refinancing
The debt refinancing is conditional upon, inter alia:
* the sanctioning of the scheme by the High Court of South Africa ("the Court");
* the Securities Regulation Panel waiving the requirement that the Capital
Providers, collectively or individually, will be obliged to make an offer to the
minority shareholders of MGX in the event that there is a change of control of
MGX as a result of the debt refinancing and/or the scheme; and
* the shareholders of MGX, Main Street and the Guarantor, in general meeting,
passing all of the resolutions necessary to implement the debt refinancing.
5. IMPORTANT TERMS AND CONDITIONS OF THE SCHEME AND THE MGX B FACILITY
5.1 The scheme
The debt remaining in MGX after the debt refinancing will be approximately R65
million which will be settled by MGX issuing the Notes to the scheme creditors
in terms of the scheme.
Subject to the Court convening the meeting/s for scheme creditors ("the scheme
meeting/s"), full details of the scheme and the terms and conditions of the
Notes will be provided in a circular to the scheme creditors. In addition, the
important terms and conditions of the scheme and the full terms and conditions
of the Notes will be provided to MGX shareholders in the circular relating to
the debt refinancing.
5.1.1 Important terms of the Notes
The Notes will:
* be issued at a nominal value of R1.00;
* accrue interest at the prime rate plus 3%, which interest will be capitalised
on a nacq basis;
* be repayable from the excess cash flows of Main Street once the capital and
interest on the Metrofile C facility has been repaid;
* have a fourth right of recourse to the security and rank
pari passu with the rights of the MGX B facility; and
* be compulsorily converted into MGX shares:
- if the Metrofile C facility converts into Main Street shares at any time; or
- in the event that the Notes have not been redeemed for cash within five years
of the date of the debt refinancing becoming unconditional.
In the event that the Notes are compulsorily converted, the formula to
determine the number of MGX shares to be issued to a holder on a conversion of
the Notes is the same as for the MGX B facility, as discussed in paragraph 5.2,
and no voluntary conversion of the Notes into MGX shares is provided for.
5.1.2 Conditions precedent to the scheme
The scheme is conditional upon the following:
* the debt refinancing agreement becoming unconditional, save for any conditions
to the debt refinancing requiring the scheme to become unconditional;
* the approval by the requisite majority of shareholders of MGX in general
meeting of the:
- debt refinancing; and
- issuance of the Notes;
* all regulatory approvals and consents necessary in respect of the debt
refinancing and the scheme being obtained;
* the scheme being approved by a requisite majority of each class of the scheme
creditors;
* the Court sanctioning the scheme;
* a certified copy of the order of the Court sanctioning the scheme being
registered by the Registrar of Companies in terms of the Companies Act; and
* the announcement by MGX on SENS that all conditions precedent to the scheme
have been fulfilled or waived in accordance with the terms of the scheme.
5.2 The MGX B facility
The MGX B facility will:
* be a three year credit facility made available to MGX in the amount of R20
million;
* accrue interest at the prime rate plus 3%, which interest will be capitalised
on a nacq basis;
* be repayable from the excess cash flows of MGX on a pari passu basis with the
Notes; and
* be secured by Didata (UK) Limited ("Didata UK") shares and a fourth right of
access to the security and rank pari passu with the rights associated with the
Notes to the extent not secured by the Didata UK shares.
The balance of the MGX B facility, inclusive of accrued and capitalised
interest, after the exercise of security over the Didata UK shares, outstanding
will be compulsorily convertible into MGX shares at the end of five years.
In the event that the MGX B facility converts into MGX shares, it will convert
in terms of the following calculation:
MCS = MCO / MVPMS
where:
MCS = the number of MGX shares which will be issued to the relevant capital
provider converting the MGX B facility into MGX shares.
MCO = the principle amount outstanding, including any accrued and capitalised
interest.
MVPMS = a. if MGX is listed on the JSE Securities Exchange South Africa ("JSE"),
the volume weighted average share price of any MGX share as quoted on the JSE
for the three months prior to the date of the conversion of the MGX B facility
into MGX shares; and
b. if MGX is not listed on the JSE, the Services Sector price: earnings
multiple as quoted by the JSE on the date of the conversion of the MGX B
facility into MGX shares less 10% and multiplied by the consolidated earnings of
MGX and divided by the total number of MGX shares in issue before the
conversion.
6. RELATED PARTY TRANSACTION
The Price family interests are the controlling shareholders of Eureka
Industrial Limited ("Eureka") which is a material shareholder of MGX. In
addition, Eureka is a beneficial shareholder of 100% of the issued share capital
of Eurevest, a capital provider to MGX and a party to the agreements relating to
the debt refinancing. Consequently, the debt refinancing and the scheme,
collectively, constitute a related party transaction in terms of the Listings
Requirements of the JSE. Accordingly, written confirmation from an independent
professional expert acceptable to the JSE Listings Committee, as to whether the
terms and conditions of the conversions of the relevant Metrofile facilities
into Main Street shares and the Notes and the MGX B facility into MGX shares
("the conversions") are fair and reasonable to the shareholders of MGX, is
required.
In addition, the Price family interests and their associates will be excluded
when determining a quorum at the general meeting relating to the debt
refinancing and their votes will not be taken into account in determining the
results of the voting on the resolutions relating to the debt refinancing at
such general meeting.
7. INDEPENDENT ADVISER"S OPINION
Deloitte & Touche Corporate Finance has been appointed by the board to act as
the board"s independent adviser to advise the board on whether the terms and
conditions of the conversions are fair and reasonable to the shareholders of
MGX. The substance of such advice will be included in a circular to MGX
shareholders.
8. CONTINUED SUSPENSION OF MGX"S LISTING ON THE JSE
The debt refinancing and the scheme remain conditional upon the fulfilment of
the conditions precedent set out in paragraph 4.2 and 5.1.2 respectively.
Accordingly, the board continues to deem it appropriate that the listing of the
MGX share on the JSE remains suspended until the debt refinancing and the scheme
become unconditional.
9. IMPORTANT DATES AND TIMES OF THE DEBT REFINANCING
The important dates and times in respect of the debt refinancing are set out
below.
2004
Last day to lodge forms of proxy for the general
meeting of shareholders at 09:00, on Thursday, 15 January
General meeting of shareholders at 09:00, on Monday, 19 January
Results of the general meeting published on
SENS, on Monday, 19 January
Results of the general meeting published in the
press, on Tuesday, 20 January
Note:
1. These dates and times are subject to amendment. Any such amendment will be
published on SENS and in the press.
10. GENERAL MEETING AND CIRCULAR
A general meeting of MGX shareholders will be held at 22 Milkyway Avenue,
Linbro Business Park, Linbro Park, Sandton, at 09:00 on Monday, 19 January 2003,
for the purpose of considering and, if deemed appropriate, approving the
resolutions necessary to implement the debt refinancing.
A circular containing full details of the debt refinancing and the general
meeting will be posted to shareholders in due course.
11. IMPORTANT DATES AND TIMES OF THE SCHEME
The important dates and times of the scheme meeting/s will be announced on SENS
and in the press if the Court convenes the scheme meeting/s.
12. SCHEME MEETING/S AND CIRCULAR
Subject to the Court convening the scheme meeting/s, the scheme meeting/s will
be held at 22 Milkyway Avenue, Linbro Business Park, Linbro Park, Sandton, for
the purpose of considering and, if deemed appropriate, approving the scheme. A
circular containing full details of the scheme and the scheme meeting/s will be
posted to scheme creditors if the Court convenes the scheme meeting/s.
13. CAUTIONARY ANNOUNCEMENT
In the event that the suspension of the listing of the MGX share is lifted, MGX
shareholders are advised to exercise caution when dealing in their MGX shares
until such time as a further announcement relating to the financial effects of
the debt refinancing and the scheme on MGX is published ("the further
announcement"). It is expected that the further announcement will be published
on or before 10 December 2003.
27 November 2003
Sandton
Merchant bank and sponsor
SCMB
Standard Corporate and Merchant Bank
(A division of The Standard Bank of South Africa Limited)
(Registration number 1962/000738/06)
Debt adviser
CMS
Credit Management Solutions (Pty) Ltd
Independent adviser
Deloitte and Touche
Corporate Finance
Attorneys to MGX
WWB
Webber Wentzel Bowens
Reporting accountants and auditors
Deloitte and Touche
Chartered Accountants (SA)
Registered Accountants and Auditors
Attorneys to the Capital Providers
Deneys Reitz Attorneys
