“To improve the flexibility of repayment patterns through better alignment with the Group’s funding requirements, GijimaAst has restructured its debt with existing investors under a long-term debtors securitisation funding programme, which it originally entered into in July 2006,” explains Carlos Ferreira, Chief Financial Officer of GijimaAst.
In terms of the programme, GijimaAst initially raised R256 million from investors in the Capital Markets at fixed rates for a period of five years, which is due to expire in July 2011. As part of implementing the programme, GijimaAst had sold the trade debtors of certain of its subsidiary entities to an independently owned special purpose entity, GijimaAst Finance (Pty) Ltd (“GijimaAst Finance”).
“In December 2008, we took the view to access additional cash reserves of R100 million on the programme to provide for the anticipated tightening credit markets over the 12-month period that followed,” states Ferreira.
Despite the healthy growth in cash generated from operations, the Group persisted with its policy to preserve cash during the uncertain period of the economic recession, and the R100 million was extended for a further six months to 21 June 2010.
In February 2010, by mutual agreement with a participating investor, the Group elected to undertake an early settlement of R125 million of the original R256 million, resulting in a balance of R231 million in outstanding debentures. Through the debt restructure, all the remaining Class A debentures under the programme have been redeemed.
New debentures (comprising 150 Class A1 fixed and floating rated secured debentures with a nominal value of R1 million each and a maturity date of 30 June 2015, and 150 Class A2 floating rate secured debentures with a nominal value of R1 million each and a maturity date of 30 June 2012) totalling R300 million were created and issued on, or about, 21 June 2010. The Class A1 and A2 debentures have been rated AA.
These debentures attract a weighted average interest rate of 10,04% compared to the existing 10,02% that the Group was paying on existing debentures.
“By redeeming all existing debentures maturing this month and in July 2011, and through the issuance of new debentures of R300 million with two and five year maturity dates, we have been able to secure our anticipated funding requirements for future years at competitive rates, on the strength of our debtors book.
“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,” concludes Ferreira.
