AVENG LIMITED - Further update on early bond redemption and withdrawal of cautionary announcement

Release Date: 29/08/2018 17:45
Code(s): AEG AEGCB
 
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Further update on early bond redemption and withdrawal of cautionary announcement

AVENG LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
Share code: AEG
Share ISIN: ZAE000111829
JSE 2019 Convertible Bond Code: AEGCB
JSE 2019 Convertible Bond ISIN: ZAE000194940
("Aveng", "the Company")

FURTHER UPDATE ON EARLY BOND REDEMPTION AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

1     INTRODUCTION

Aveng Shareholders are referred to the announcement released on SENS on Wednesday, 8 August 2018
in which Aveng gave an update on the Early Bond Redemption. Capitalised terms used in this
announcement are as defined in previous SENS announcements.

Aveng is pleased to announce the final terms of the Early Bond Redemption which is subject to final
Shareholder and Existing Convertible Bondholder approval. The settlement of the Existing Convertible
Bonds will consist of:
   - The specific buyback of R657.15 million of Existing Convertible Bonds (including accrued interest)
     at a price of 70% of par, for a price of R460 million ("Specific Bond Buyback").
   - The issue of a new debt instrument of R460 million to Participating Bondholders, the terms of which
     will rank pari passu with Aveng bank debt.
   - The redemption of all outstanding Existing Convertible Bonds at par through a specific issue of
     Aveng Ordinary Shares at 10c, equivalent to the Rights Offer Price ("Specific Issue").


2     EARLY BOND REDEMPTION

2.1     Terms of the Existing Convertible Bond settlement and the Early Bond Redemption

2.1.1   Specific Bond Buyback

Aveng will repurchase R657.15 million of Existing Convertible Bonds (including accrued interest) for R460
million at a price of 70% of par from Participating Bondholders. To fund the Specific Bond Buyback, Aveng
will issue a new debt instrument of R460 million, which instrument will be underwritten by Participating
Bondholders. The new debt instrument will rank pari passu with the existing bank debt.

2.1.2   Specific Issue

All outstanding Existing Convertible Bonds together with the accrued interest will be redeemed through a
specific issue of Aveng Ordinary Shares at the Rights Offer Price.

Prior to the Specific Bond Buyback, the principal amount of Existing Convertible Bonds outstanding will be
R2 036.79 million (which includes R72.5 million of capitalized interest for the interest period ending 24 July
2018, which was capitalized in accordance with the amended terms and conditions of the Existing
Convertible Bonds, and which was announced on 3 July 2018 ("Capitalised Interest")). The total accrued
interest to be paid on the outstanding Existing Convertible Bonds for the interest period commencing on 24
July 2018 (“Accrued Interest”) amounts to R23.55 million, assuming the Specific Bond Buyback and the
Specific Issue take place according to the salient dates in paragraph 4. As such, following the Specific Bond
Buyback of R657.15 million the total amount to be settled by the Specific Issue is R1 403.53 million,
resulting in the issue of 14.035bn new Aveng Shares.

Total Bond settlement

                                                                                           R'm
              Principal amount of outstanding convertible bonds                       2 037.13
              (including Capitalised Interest)
              Accrued Interest                                                           23.55
              Specific Bond Buyback                                                   (657.15)
              Total to be settled by Specific Issue                                   1 403.53
              Number of shares to be issued (bn)                                        14.035

Bond settlement for 1 Existing Convertible Bond

An Existing Convertible Bondholder holding 1 Existing Convertible Bond will receive 104 922 Aveng Shares
in the Specific Issue:

                                                                                            R
             Original principal of Existing Convertible Bond                        10 000.00
             Capitalised Interest                                                      362.50
             Accrued Interest                                                          129.67
             Total to be settled by Specific Issue                                  10 492.17
             Number of shares to be issued                                            104 922



2.1.3   Approvals

The Early Bond Redemption is conditional on:
   - Approval from Existing Convertible Bondholders at a bondholder meeting to be held on Thursday,
     30 August 2018 to pass the necessary resolutions to redeem the Existing Convertible Bonds in the
     issue of Aveng Ordinary Shares; and
   - Approval from Aveng Shareholders to pass the necessary resolutions at the General Meeting to be
     held on Monday, 10 September 2018 to give effect to the Specific Issue and the matters incidental
     thereto.

The circular which contains details of the Specific Issue and incorporating a notice of general meeting was
distributed to Aveng Shareholders on Friday, 10 August 2018.

A bondholder notice, incorporating a notice of general meeting was distributed to Existing Convertible
Bondholders on Wednesday, 8 August 2018.

3   PRO FORMA FINANCIAL EFFECTS

The pro forma consolidated summarised statement of comprehensive earnings and the pro forma
consolidated summarised statement of financial position have been prepared to show the financial effects
of the Rights Offer, as an event after the reporting date, as well as
         - the Specific Bond Buyback and issuance of the new debt instrument;
         - the Specific Issue; and
         - the transaction costs.
(collectively "the Pro Forma Adjustments")

The summary pro forma financial effects have been prepared for illustrative purposes only to illustrate the
impact of the Specific Bond Buyback and Specific Issue on the financial position of Aveng under the
assumption they have been implemented as at 1 July 2017 for the purpose of the statement of
comprehensive earnings and 31 December 2017 for the purpose of the statement of financial position.

General notes and assumptions

    -   The pro forma statement of comprehensive earnings was prepared on the assumption that the Pro
        Forma Adjustments were implemented on 1 July 2017. As at 1 July 2017, prior to the Pro Forma
        Adjustment, the principal amount of the Existing Convertible Bonds was R2 000 million and the
        accrued interest c.R62.8 million.
    -   All adjustments in the pro forma statement of comprehensive earnings have a continuing effect,
        unless otherwise stated.
    -   The pro forma statement of financial position was prepared on the assumption that the Pro Forma
        Adjustments were implemented on 31 December 2017. As at 31 December 2017, prior to the Pro
        Forma Adjustment, the principal amount of the Existing Convertible Bonds was R2 000 million and
        the accrued interest c.R62.8 million.
    -   The pro forma financial effects have not taken the following post balance sheet events into account:
        Subsequent to 31 December 2017 the Group secured a working capital facility totaling R200 million.
        Moreover, Aveng recently secured an additional R200 million bank debt of which R150 million has
        been drawn immediately. The facility bears interest at between 2% and 6% above South African
        prime lending rates and is repayable by June 2019.

                             Interim     Event after       At 31 Dec    Specific                   Specific         After the
                             results       reporting      2017 after        Bond                      Issue         Pro-Forma
                             (31 Dec    date: Rights    Rights Offer     Buyback    (5),(6),(7),(8),(9),(10)       Adjustments                          
                            2017) (1)       Offer(2)                     (3),(4)            
                                                          




  EPS
  Basic (cents)               (87.4)            80.9           (6.5)         3.1                        2.7              (0.7)
  Diluted (cents)             (86.3)            79.8           (6.5)         3.1                        2.7              (0.7)
  HEPS (cents)
  Basic (cents)               (84.4)            78.1           (6.3)         3.1                        2.6              (0.6)
  Diluted (cents)             (83.3)            77.0           (6.3)         3.1                        2.6              (0.6)
  NAV per share                 13.3          (12.2)             1.1                                   (0.8)              0.3
  (Rand)
  NTAV per share                 9.2           (8.4)             0.8                                   (0.5)              0.3
  (Rand)
  Number of shares in           417            4 932           5 349                                  14 056            19 405
  issue (million)

  Weighted average              397            4 932           5 329                                  14 056            19 385
  number of shares in
  issue (million)

  Weighted average              402            4 932           5 334                                  14 056            19 390
  diluted number of
  shares in issue
  (million)


Notes and assumptions relating to the statement of comprehensive earnings and statement of financial
position:

   1. The results for December 2017 were extracted without adjustment from the reviewed interim
      condensed consolidated financial information of Aveng for the six months ended 31 December
      2017.

   2. An aggregate of 4 931 854 395 Aveng Ordinary Shares have been issued pursuant to the Rights
      Offer at a Rights Offer Price of R0.10. This has resulted in gross proceeds of c.R493 million being
      raised in the Rights Offer and is reflected as such in the pro forma statement of financial position.

   3. New debt instrument of R460 million to be issued, the proceeds of which will be used to repurchase
      Existing Convertible Bonds in the secondary market at a price of 70% of par. The proceeds from
      the new debt instrument are used to repurchase Existing Convertible Bonds with a principal value
      of R657 million in the secondary market. This results in a reported income of R197 million as per
      the pro forma statement of comprehensive earnings (excluding finance earnings effects). This is a
      once-off event.

   4. The new debt instrument is assumed to attract interest at 3 month JIBAR + 6.17% (12.86%), on
      the basis that the new debt instrument will rank pari passu with the current bank debt and will have
      terms equivalent to those of the current bank debt. Six months of interest has been accounted for
      in the statement of comprehensive earnings, resulting in finance expenses of R30 million.

   5. The Existing Convertible Bond coupon of R72.5 million payable on 24 July 2017 and the resulting
      tax impact of R20 million are reversed in the statement of comprehensive earnings.

   6. The remainder of the Existing Convertible Bonds not repurchased by the new debt instrument
      proceeds i.e. R1 343 million as well as the accrued interest of R62.8 million from the last coupon
      date; are to be settled by the Specific Issue. As a result the share capital increases by R1 406
      million.

   7. Based on the Rights Offer Price of 10 cents, 14 056 million Aveng Ordinary Shares will be issued
      in the Specific Issue resulting in a total number of 19 405 million issued Aveng Ordinary Shares
      post the Early Bond Redemption. The shares are weighted for the full period; there are currently
      no dilutive instruments affecting the diluted weighted average number of shares

   8. There is no cash tax impact resulting from the Early Bond Redemption through Specific Issue, as
      the capital gain that arises from the forgiveness of debt pursuant to the Early Bond Redemption
      through Specific Issue is offset against the capital losses in Aveng Africa.

   9. The effect of Early Bond Redemption through the Specific Issue results in a deduction to borrowings
      and other liabilities of R1 317 million and deduction in equity reserve of R89 million.

  10. The estimated total transaction costs are R30 million. The transaction costs are costs directly
      attributable to the equity transaction, which are therefore recognised against an equity reserve. Of
      the estimated total transaction costs of R30 million, R0 million were pre-paid at 31 December 2017.

4     SALIENT DATES

The salient dates in relation to the bondholder and shareholder meetings are outlined below:
                                                                                                                              2018

 Meeting of Existing Convertible Bondholders to be held at 10:00 on                                            Thursday, 30 August

 Record date to participate in and vote at the General Meeting                                                   Friday, 31 August

 Last day and time to give notice to participate in the General Meeting electronically
 by 12:00 on                                                                                                 Thursday, 6 September
 
 Last day to lodge forms of proxy with the Transfer Secretaries to vote at the General
                                                                                                             Thursday, 6 September
 Meeting by 09:00 on (see note 2 below)

 General Meeting of Shareholders to be held at 09:00 on                                                       Monday, 10 September

 Results of General Meeting announced on SENS on                                                              Monday, 10 September


Notes:

 1.   The dates and times provided for are subject to amendment. Any material amendment will be published on SENS.

 2.   Proxy forms should be forwarded to be received for the orderly arrangement of matters on the date of the General Meeting (but
      not required) by the company’s transfer secretaries, by 09:00 on Thursday, 6 September 2018 for administrative purposes (or
      alternatively to be handed to the chairperson of the General Meeting prior to its commencement).

Pursuant to obtaining the approval of the bondholders and shareholders as set out in paragraph 2.1.3
above, the estimated date on which the Early Bond Redemption and thus the Specific Issue is to take place
is on Tuesday, 25 September 2018.



5   WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

All information in relation to the Capital Markets Transaction has been announced and as such the
cautionary relating to the Capital Markets Transaction is withdrawn.



Jet Park
29 August 2018

Financial advisor and transaction sponsor for the Capital Markets Transaction
Rand Merchant Bank (A division of FirstRand Bank Limited)

Legal advisors
Baker McKenzie

Debt sponsor
Absa Bank Limited, acting through its corporate and investment banking division


Michael Canterbury
Group Executive: Strategy & Investor Relations
Tel: 011 779 2979
Email: michael.canterbury@avenggroup.com

Date: 29/08/2018 05:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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