Hwange Colliery appoints financial advisor

Business Reporter
COAL miner Hwange Colliery Company Limited has appointed Infrastructure Development Bank of Zimbabwe to evaluate a US$50 million rescue package for the company by British businessman and shareholder Mr Nicholas van Hoogstraten.
The offer was in response to a request for a US$20 million bailout by the cash-strapped company. But Mr van Hoogstraten has demanded exclusive control of the coal mining giant for five years in exchange for the US$50 million cash injection that would be availed through obscure share transfers.

IDBZ, Hwange’s lead financial advisor, is expected to make recommendations by the end of this month.
Hwange has been on the market in and outside the country, sourcing funds for recapitalisation.

Under the proposed transaction, the businessman wants effective management of Hwange Colliery through a designated Special Purpose Vehicle falling under Willoughby’s Consolidated, a London- based company owned by his family.

A co-ordinating committee comprising three of Willoughby’s representatives and two Hwange directors would be put in place, after which the US$50 million loan would be made available.

Mr van Hoogstraten owns about 30 percent of the company through family vehicles. According to the proposal, the US$50 million capital injection will be formalised and secured by the issue of convertible loan stock with a 10 percent interest rate, a conversion rate of one new US25c ordinary share for each US0,50c of loan stock and convertible at the end of the fourth year.

The Government’s 37,08 percent shareholding would be maintained while debts owed to statutory bodies will be converted into five-year preference shares at a par value of US$1 and a 5 percent interest rate. Banks owed by the company would receive an immediate 50 percent cash payout. Hwange said the board convened a special board meeting last Monday to deliberate on the offer.

“At the meeting, the board of directors took cognisance of the conditions relating to the offer and their effect on the rights of other shareholders. In this connection, the board resolved . . . further consideration of the proposal be progressed in view of the financial requirements of Hwange Colliery Company Limited. IDBZ, which has been working with Hwange Colliery Company Limited to raise funds since June 2013, has been appointed the lead financial advisor to evaluate the proposal and liaise with stakeholders and shareholders and present its recommendations to the board by no later than 30 November 2013,” the company added.

Some economic analysts expressed reservations on the proposed US$50 million rescue package, saying this could be tantamount to handing over a national energy asset.