The Public Investment Corp’s plans to convert its preference shares into equity in Afrisam Ltd, is an attempt to reduce debt in the cement producer while protecting value for the state employees whose assets the PIC manages.
“The goal of any restructuring is to ensure the company’s capital structure is appropriate for the business going forward,” Dan Matjila, acting chief executive officer of the PIC, said in an emailed response to questions.
Matjila said that the Pretoria-based manager of South African government employees’ pension funds filed a notice to convert to equity ZAR4.7bn (US$579m) in preference shares it holds in Afrisam, which it helped a group of black investors to buy from Holcim in April 2007.
“The PIC believes that the conversion is a fundamental first step in successfully dealing with the overleveraged capital structure of the group and would go a long way in protecting value for government employees,” said Matjila. Afrisam “needs to be deleveraged to optimize and promote operational flexibility and enhance” fundamental value.
A group of investors, led by Bunker Hills Investments Ltd., bought 85 percent of the South African operations of Holcim for ZAR16.4bn and renamed it Afrisam. Holcim retained the rest. The PIC, which manages more than ZAR1trn of state pensions, announced two months later that it owns 20 per cent of Afrisam after providing ZAR6bn of debt and preference shares to the investors.
The PIC loan was part of the funding structure.