via Hwange rejects tycoon’s $50m – Southern Eye by Nqobile Bhebhe
HWANGE COLLIERY COMPANY has rejected a $50 million bailout offered by one of its major shareholders, a British businessman and property magnate Nicholas van Hoogstraten at a time it is cutting staff by a massive 50%.
The coal miner and van Hoogstraten reached a deadlock on the control of the mine.
Van Hoogstraten had demanded exclusive control of the coal mining giant for five years in exchange for the cash injection.
Van Hoogstraten offered the $50 million loan to Hwange through his vehicle Willoughby’s Consolidated last year after the coal miner’s management approached him seeking a loan of up to $20 million for recapitalisation and to refinance short-term debt.
The offer was one of the cheapest at Hwange’s disposal in recent times, and had been greeted with excitement by the listed miner’s
3 000-strong workforce.
The coal miners then appointed Infrastructure Development Bank of Zimbabwe to evaluate a $50 million rescue package.
Under the van Hoogstraten proposal, the capital injection would have been formalised and secured through the issue of convertible loan stock with a 10% interest rate, a conversion rate of one new $0,25c ordinary share for each $0,50c of loan stock and convertible at the end of the fourth year.
The government’s 37 % shareholding would be maintained while debts owed to statutory bodies will be converted into five-year preference shares at a par value of $1 and a 5% interest rate.
In a trade update to shareholders, board chairman Farai Mutamangira said the offer could not be taken on board.
“The company received an offer for a five year convertible irredeemable loan stock in the sum of $50 million at an estimated cost of $9 million made up of an interest at 10% plus 3% of turnover and 17% of profit per annum,” he said.
“After consultation with the major shareholder (the government) and failure to break the deadlock on the issue of management control and also having regard to the costs of the funds, the company was unable to progress this offer further.”
Mutamangira said the colliery is reeling under the weight of a legacy debt of $150 million and in the past three years, $30 million has been spent servicing the debt.
“With increased production the company will be in a good position to clear legacy debts and quickly return to profitability,” he said.
“While the legacy debt has weighed down the performance of the company, clearly the debt will be cleared with improved product on performance premised on acquisition of new mining equipment.”
Mutamangira said by end of May, a $33,5 million additional recapitalisation transaction would be wrapped up.
A total of $18,5 million is expected from BELAZ/PTA Bank facility and $15million from BEMl/Eximbank of India.
On restructuring, which is part of the turnaround strategy, executive management will be restructured by “resising senior management positions and bringing on board a chief operating officer to strengthen management”.
“Staff rationalisation is aimed at reducing staff complement by 50% of current and also reducing the wage bill by 50%,” Mutamangira said.
“The retrenchment packages are to be amortised against non-core assets and deferred financial instruments.”