Holcim South Africa buyout debt to be led by two sources

Holcim South Africa buyout debt to be led by two sources
Published: 13 September 2007

Citi and  JPMorgan have been mandated to arrange the debt supporting the recent buyout of South Africa-based cement company Holcim South Africa, two people familiar with the situation said Wednesday.  
Black empowerment consortium AfriSam Consortium (Pty) acquired a majority stake in  Holcim this year.  
Holcim Switzerland announced in August 2006 that it was selling 85% of its 54% stake in the local cement producer to AfriSam based on an enterprise value of ZAR16.4 billion. Earlier this year, construction, steel and cement group Aveng also announced that it was selling its 45.7% holding in Holcim South Africa to AfriSam for ZAR7.4 billion, according to press reports.  
The two people familiar with the situation declined to give details on the size of the debt package or the structure of the deal. Recent buyouts in South Africa, such as Brait Private Equity’s acquisition of South Africa’s biggest glass packaging  Consol Ltd., have been financed predominately in the high-yield bond market in the form of senior secured notes. The bond format allows the borrowers more flexibility to invest in growth unhampered by the restrictive covenants of bank debt, and because South Africa’s domestic institutional investor market isn’t big enough to absorb large debt packages exclusively in South African rand, South African issuers can achieve more flexible terms and higher leverage relative to the local markets from offshore investors.  
The timing of the debt is still to be determined, but one of the people said it might not come to market until early 2008.  
As a result of the buyout, a new company AfriSam (South Africa) (Pty), was formed, Holcim South Africa, said on its Web site. Holcim Switzerland maintained a 15% stake in Holcim South Africa. 
Holcim South Africa has total assets in excess of ZAR3.7 billion, annual sales of more than ZAR4.9 billion and more than 2 000 employees, according to the Web site.  
AfriSam Consortium is owned by Bunker Hills; community and women’s groups; and employees of AfriSam (South Africa) (Pty).