Document management company Metrofile Holdings has arranged to refinance R320 million in debt at its subsidiary, Metrofile, and is to seek shareholder approval for a rights issue of R135 million to cover other liabilities at holdings level, it told the JSE on Friday.
The company said it will propose buying out the 35% it does not own in Metrofile, which will require it buy out black economic empowerment partner, Mineworkers Investment, which owns 25% of the subsidiary, and management and directors, who own 10%.
CEO Graham Wackrill says this could only be done once debt at subsidiary level was restructured. He added the minority stake might move up to holding company level, where it makes more sense.
Liabilities
Metrofile has R10 million in mortgage debt and R310 million in loan debt, which needs to be repaid by 4 March 2009. Should it miss this date, some of the loan debt will be converted to shares in Metrofile Holdings, diluting its 65% holding, the announcement said.
To avoid this, it has borrowed R330 million from Standard Bank, which is subject to it meeting certain conditions.
At holding company level, it owes R85 million to external creditors, which could see further dilution of its stake, it said. The company said it has another R32 million owing to other creditors and anticipates contingent liabilities of R10 million that might need to be paid in due course.
To cover these debts, a rights issue of R135 million will be proposed. This will be used to settle R117 million in loan notes and creditors, as well as fund the costs of restructuring and allow for cash-in-hand.
Rights issue
The company said it will propose increasing the amount of shares in issue in order, and terms of the rights issue are expected to be announced in September, after it has released its year-end results to end-June.
The company also said it will place its 6.7 million treasury shares under directorship control. These will only be issued for cash if a contingent liability arises that is not covered by the rights issue.
Group cash flows will continue to be applied to the repayment of debt and no dividends are expected to be declared during the six-year refinancing period, it said.
Going concern
In its interim results to end-December, Metrofile reported revenue of R136.6 million, but said liabilities exceeded assets, as these assets were reflected at its historical cost.
Despite this, the company is viewed as a going concern by the board because capital repayments and the cost of debt are covered by current and projected cash flows. In addition, payments to all trade creditors were up to date and the group is trading in line with budgets, among other reasons.
Wackrill said the debt was inherited from MGX in 2003/4. Metrofile`s shares closed down on Friday at R2.10, 10c off Thursday`s close.
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