The Public Investment Corporation (PIC) would be in a better position to renegotiate with the holders of EUR1bn (ZAR10.8bn) in AfriSam debt if it had full control of the cement maker, the state-owned asset manager said on Friday.
The PIC had the resources and relations to reorganise the debt and save AfriSam from bankruptcy, its lawyer, Dennis Fine, told the North Gauteng High Court in Pretoria.
The PIC, which manages about ZAR1trn in pensions for government workers, and former MTN Group chief executive Phuthuma Nhleko are bidding to gain control of AfriSam by converting debt they own in the company into shares. Interest repayments are threatening AfriSam’s ability to continue its operations.
Holcim created AfriSam in 2006 by selling most of its South African business to black investors led by Bunker Hills Investments, which is trying to block the conversion.
“The question for the court is to decide who will be better positioned to negotiate with the bondholders,” Fine said.
AfriSam, the second-largest cement company in South Africa, must settle the debt by 4 February next year. The debt was arranged by the Johannesburg offices of JPMorgan Chase and Citigroup.
AfriSam’s largest shareholder, Bunker Hills, with a 37 per cent stake, is seeking a permanent order to prevent the PIC from redeeming its ZAR4.7bn in preference shares in AfriSam.
In October, Bunker Hills won an interim court order temporarily stopping the PIC from converting the preference shares into ordinary shares.
“The PIC will take the company for nothing if it is allowed to convert the preference shares,” Bunker Hills lawyer Altus Joubert said in court on Thursday.
A takeover would dilute the stakes of other shareholders to “effectively nothing”, Joubert argued.
Holcim sold most of its South African business to Bunker Hills and other investors for ZAR23bn in a transaction that was funded with debt.
The PIC owns 20 per cent and Holcim retained a 15 per cent stake, while the management of AfriSam and other investors hold the balance.
“The case is about the protection of our rights,” said Joubert, adding that the PIC would need the approval of 75 percent of AfriSam’s investors to convert the preference shares.
“There is an lawful impingement on our rights,” he said.