admin
Golden Sibanda Senior Business Reporter
ONE of PG Industries major shareholders will increase its stake in the group to 35 percent from about 18 percent when they convert their share of the $6,7 million debentures.
The debt to equity conversion is part of a comprehensive balance sheet restructuring exercise, the scheme of arrangement, which received 100 percent vote of approval from the debenture holders.
The scheme entails secured suppliers scheme, concurrent creditors’ scheme and the debenture holders’ scheme. PG management expects to have the initiative concluded early next year.
One of the seven major shareholders accounted for 42 percent of the debenture since the shareholder, whom executives would not disclose, had underwritten the capital raising initiative. The major shareholders in PG include Stanchart Nominees at 18,01 percent, Old Mutual Life Assurance with 17,52 percent, Second Nominees at 16,69 percent, Prestige Investments 13 percent, Fed Nominees 8 percent, African Bank 2,1 percent and Communications and Allied Industries at 1,64 percent.
Finance director Mr Adam Zvandasara said in an interview yesterday the scheme of arrangement, which will unlock $1 million fresh capital, will be concluded in the first quarter next year.
“Members (also) unanimously approved the transaction at their AGM of 14 March 2014. Management expects the High Court registration before end of the first quarter of 2015,” he said.
The PG group finance director said the debentures were due to mature in December next year.
“We approached them and said look the maturity debt is 2015, with what has happened to the business obviously we can’t find $6,7 million to pay you. We said that part of the clauses say you can convert (the debentures into equity) so why don’t you convert,” he said.
“In terms of the shareholding, at the end of the day, fortunately, the debenture holders are also the major shareholders. The entire $6,7 million was taken by the major shareholders.
“The major shareholders are the debenture holders, so they are still going to end up the major shareholders after the conversion, some of them did not take the debentures to the same level as their shareholding,” said Mr Zvandasara.
He said all Companies Act requirements for the scheme of arrangement have been complied with. The scheme is critical to consummation of all initiatives PG has instituted to turnaround its fortunes. Mr Zvandasara said PG had covered significant ground in turning around its fortunes including massive reduction of high interest bearing short-term debt and rationalisation of operations.
Major progress has also been achieved in raising $3,5 million to further recapitalise the business. A $1,1 million loan was secured from BancABC in June and deployed in stocks for PG Merchandising, PG Glass, raw materials for Zimtile and capital gains tax for a property-debt swap.
Two properties were sold in June for $960 000, an additional two for $110 000 with part of the proceeds going to stocks and raw material and the balance to clearing loans with banks.
The impact of the funding is expected to be felt on the business in the second half of this year. An additional $1 million will come from Old Mutual once the High Court endorses the scheme.
Mr Zvandasara said consignment stocks have also been put in place covering timber, cement, boards, doors and some hardware products, which has kept the business, really, going”.
“I do not know what other arrangement one would need, especially in this environment we have,” he said, adding that good relations with suppliers had propped up good stock levels.
“We expect really significant cost savings by end of year; especially in as far as overheads are concerned after the restructuring, from a back office activities and operations point of view,” Mr Zvandasara said.
Earlier, PG had reduced its exposure in Manica Boards and Doors from controlling stake to about 28 percent to focus on light manufacturing, closed PG Safety Glass due to antiquated equipment, which could not be replaced.
PG’s branch network had also been reduced from 42 in 2009 to 16. It closed small business units such as Johnson and Fletcher and PG Timbers and merged the entities into PG Building Supplies.
Mr Zvandasara said that over $7,4 million worth of antiquated equipment has been impaired during the restructuring exercise, including once off payment associated with retrenchment.
The group has also consolidated retail operations of DST Supplies under PG Building Supplies and collapsed all back office operations of the SBUs into centralised single retail unit.
PG also replaced its antiquated Harare tiles plant, with capacity of 65 000 tiles per day, at a cost of $2,5 million and no operational issues have been reported since its installation in 2011.
Restructuring of units resulted in head count being reduced from 1 500 in 2009 to about 447.
The group had virtually no funding to support operations at dollarisation in 2009, but successfully raised $11,2 million capital in 2010; with $6 million of that going to short-term debt.
Online Reporter