JSE-listed GijimaAst has raised R256 million for a five-year period to retire its short-term obligations, clearing the way to buy Absa out of their joint venture.
The financing, for a fixed interest rate of 10.17%, allows the company to settle short-term debt obligations, retain cash for working capital and look at buying out minorities in subsidiaries it does not own outright.
Financial director Carlos Ferreira says the company will have about R130 million in the bank after clearing its debt, which it could also put towards organic or acquisitive growth. As a result, GijimaAst now has funds available to consolidate its shareholding in other interests. At the moment, it is in discussions with Absa, which has a 30% stake in Distributed Technology Services, to buy out this stake.
GijimaAst - which does not have to make capital payments for the term of the financing - is now in a position to settle a R75 million overdraft, as well as historical debt. It has cleared out the historical debt to Kumba Resources of R21 million, and debt to the South African Revenue Service of R31 million.
The company, which secured the rate before prime went up 0.5% to 11.5%, has the option of settling the debt after five years, or rolling it over. Ferreira says while interest will have to be paid on a quarterly basis, this was an attractive way of raising debt, as it is cheaper than issuing shares, for example.
In a statement issued to shareholders yesterday, the company said it was able to secure the funding as a result of the "strength of its debtors book".
"The programme has also enabled the GijimaAst Group to secure the release of numerous restrictive covenants and suretyships, which have inhibited the GijimaAst Group`s ability to apply its balance sheet in an efficient manner," it said.
Most of the funding was raised from various investors in the capital market, the company said. As part of raising the funding, the company sold debtors from some of its subsidiaries to an independently owned special purpose entity, GijimaAst Finance.
The special purpose vehicle funded the purchase price that was paid to GijimaAst by issuing debentures. Some 256 of the debentures were issued to investors in the capital market at a fixed rate, while 64 debentures were subscribed for by a subsidiary of GijimaAst, at a variable interest rate.
GijimaAst`s shares closed at 56c yesterday, unchanged from Wednesday`s close.
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