Listed outsourcing company GijimaAst has restructured its long-term debt, giving it more flexibility to fund growth requirements.
The company has settled the R256 million of long-term debt it raised in 2006, which it would have had to pay back in the middle of next year, by issuing new debentures worth R300 million.
CFO Carlos Ferreira says the decision to restructure its long-term debt was based on GijimaAst's need to improve the flexibility of its repayment patterns. The new debt structure is now aligned to the group's funding requirements and has been restructured with its current investors.
He says the new arrangement has enabled GijimaAst to “secure our anticipated funding requirements for future years at competitive rates”.
In February, Ferreira said the company aimed to restructure debt, because it was paying out more interest than what it earned, causing what he terms “interest leakage”.
At the end of December - the latest period for which the company has reported - it had R257.2 million in long-term debt and R100 000 in shorter-term debt. GijimaAst had also generated R211.6 million in cash, taking its entire cash balance to R623 million.
Keeping the cash
GijimaAst initially raised R256 million in long-term debt from investors in the capital markets at fixed rates. The five-year loan was due to expire next July.
In December 2008, the company raised an additional R100 million for a 12-month period in anticipation of tightening credit markets, explains Ferreira.
Even though GijimaAst is cash-generative, it extended the R100 million loan for another six months to 21 June, to preserve cash during the uncertain period during the economic recession.
In February, GijimaAst paid down R125 million of its original R256 million, resulting in a balance of R231 million in outstanding debt.
The company has now raised R300 million in debt, to settle its earlier loans at an interest rate of 10.04%, only slightly higher than what it had initially been paying. The initial loans have now been settled through a new round of debt due in two and five years' time.
“The fact that we have rolled our debentures for a two- and five-year period, respectively, demonstrates the confidence that our debenture holders have in GijimaAst as a business and its prospects going forward,” says Ferreira.
GijimaAst's announcement that it had restructured its debt pleased the market, with its shares closing 3.66% higher, at 85c, yesterday.
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