CIG previously announced that it was engaging with its lenders, being certain of the bond holders of the previously listed CIG ZAR1,000,000,000 domestic medium term note programme (“DMTN bond programme”) and the local bank lenders to its subsidiary Consolidated Power Projects Proprietary Limited (“Conco”), to restructure its short-term debt profile into a longer, more sustainable, debt structure.
The Company is pleased to announce that today it has finalised, and signed, a binding term-loan facility agreement with four CIG DMTN bond holders (“Original Lenders”). These agreements have restructured its debt profile under the DMTN bond programme.
This restructuring results in a substantial portion of the short-term debt owed by the company being converted to term debt. Short-term debt to the value of R613 million is therefore now converted to long-term debt. The mechanics for the implementation of the revised debt agreement are as follows:
1. The Company has issued bonds to the value of R924 million in terms of the DMTN bond programme.
2. The R924 million bond is reflected as short-term in nature and reflected as current liabilities in the annual financial statements dated 31 December 2019 (as issued on SENS on 28 February 2020).
3. Following signature of this term-loan facility agreement with four Original Lenders, the Company:
a. will redeem all outstanding notes held by all noteholders, other than the four Original Lenders who are party to the term-loan, on 31 March 2020, utilising available cash of R11 million;
b. has entered into a note purchase agreement whereby the company purchased notes from the four Original Lenders at an aggregate nominal value of R150 million, utilising available cash; and
c. has entered into a second note purchase agreement where the company will purchase the remaining notes from four Original Lenders at an aggregate nominal value of R763 million utilising a term-loan simultaneously provided by these four Original Lenders. This therefore will extinguish all liability due on the DMTN bond programme.
The salient features of this R763 million term-loan facility are as follows:
a. Repayment profile:
The Company will repay the loan in the following manner:
a. 31 December 2020: R150 million
b. 31 December 2021: R163 million
c. 30 June 2022: R450 million (being the final maturity date)
There are various mandatory prepayment conditions customary to such a facility and voluntary prepayments are allowed
a. Interest is levied at JIBAR plus 4% to 4,45%.
b. Until 1 January 2021, interest is paid in cash at 3,75% plus JIBAR. The balance is capitalised.
c. A restructuring fee will be paid by the Company to the four Original Lenders.
d. Financial covenants include:
a. A Conco Debt Service Cover Ratio being the Conco free cash flow to its debt service. This must be maintained at a ratio of 1.1x for each measurement period;
b. The following ratios set at specific levels per quarterly measurement period;
i. A Loan to Value Ratio being, at any measurement date,
1. the ratio of total debt owed by the Company and its Non-EPC subsidiaries (Conlog Proprietary Limited (“Conlog”), the Consolidated Building Materials group of companies, which include West End Claybrick and Drift Supersand and Angola Environmental Servicos Limitada (“AES”)) and the term-loan being established for Conco by its local bank lenders (“the Consolidated Borrowings”); and
2. the total value of the Company’s investment in Conlog, the Consolidated Building Materials group of companies and its investment in AES.
ii. A Leverage Ratio being, at any measurement date,
1. the ratio of Consolidated Borrowings to the consolidated Non-EPC subsidiaries group earnings before interest and taxation (“Consolidated Non-EPC Group EBITDA”); and
iii. An Interest Cover Ratio being, at any measurement date,
1. the ratio of Consolidated Non-EPC Group EBITDA to the consolidated finance costs
e. Transaction security provided for the term-loan includes:
a. Pledge and cession in respect of the shares and claims held by CIG and its subsidiaries in the Consolidated Building Materials group of companies and in AES; and
b. A reversionary cession and pledge in respect of the shares and claims held by the CIG Group and its subsidiaries in, and against, Conlog.
f. The security will be released on the discharge date being the date on which all facility outstandings have been irrevocably and unconditionally paid and discharged in full; and
g. The loan is subject to normal conditions precedent (including the signature of a Conco term loan facility) which are expected to be fulfilled by no later than 30 June 2020.
The binding legal agreements between Conco and its local bank lenders are near finalisation. It is anticipated that these legal agreements will be concluded by 31 March 2020. This term-loan has resulted in an agreement with bondholders on terms acceptable to all parties and allows the Company to now focus its attention on its portfolio of businesses with a particular focus on the successful turnaround at Conco, which is critical to its success.