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AFRIMAT LIMITED - Afrimat Applies For Business Rescue Of Nkomati

Release Date: 05/10/2020 17:09
Code(s): AFT     PDF:  
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Afrimat Applies For Business Rescue Of Nkomati

(Incorporated in the Republic of South Africa)
(Registration number 2006/022534/06)
Share code: AFT
ISIN: ZAE000086302
("Afrimat" or “the Company”)



Shareholders are referred to the various SENS announcements by Afrimat and Unicorn Capital Partners Limited
(“UCP”), regarding the offer by Afrimat to acquire all the ordinary shares in UCP not already held by Afrimat (or
by its subsidiaries) or by subsidiaries of UCP, by way of a scheme of arrangement (“the Scheme”) in terms of
section 114 of the Companies Act, No. 71 of 2008 (“Companies Act”). A circular (“Circular”), detailing the
Scheme, was distributed to UCP shareholders on 9 September 2020.

UCP indirectly holds 60% of the issued shares of Nkomati Anthracite Proprietary Limited (“Nkomati”), which
operates an anthracite mine focused on both opencast and underground mining.

As indicated in the Circular, Nkomati’s debt levels are high, its liquidity is constrained and it continues to face
operational uncertainty. These challenges were exacerbated by the shut down for the initial Covid-19 lockdown
period followed by an extended illegal strike, both of which resulted in significant losses.

Following requests by UCP, Afrimat advanced working capital to Nkomati to assist with its ongoing cash flow
constraints. Due to the Covid-19 national lockdown, which resulted in an additional loss of revenue Afrimat
agreed to an extension for repayment of certain tranches which were due and repayable. Nkomati has, however,
to date been unable to settle these loans.

Nkomati has requested an urgent additional cash injection of R20 million as it has exhausted all of its cash
reserves. Afrimat is, however, unwilling to contribute any further funding to Nkomati on an unsecured basis.
Afrimat has the interests of Nkomati’s employees and community at heart and wishes to keep Nkomati’s
business operational. In order to achieve this whilst protecting the interest of Afrimat’s shareholders, the decision
was made to place Nkomati under supervision and to commence business rescue proceedings at Nkomati.


Accordingly, Afrimat, as substantial creditor of Nkomati, has launched an application in the High Court of South
Africa, Gauteng Local Division, Johannesburg, for an order, inter alia, placing Nkomati under supervision and
commencing business rescue proceedings in terms of section 131 of the Companies Act, and appointing Daniel
Terblanche as its business rescue practitioner.

Afrimat believes that placing Nkomati in business rescue, with the temporary supervision and management of
its affairs, business and properties by the business rescue practitioner and the development of a business
rescue plan, offers the best chance of avoiding a liquidation and allowing Nkomati to operate and do business
on a solvent basis. In order to facilitate this, Afrimat would be willing to provide post-commencement finance to
Nkomati, as and when needed for its operational requirements, with such finance enjoying preference, as to
repayment, as contemplated in section 135 of the Companies Act.

Should the business rescue be successful and enable Nkomati to operate on a solvent basis, this would limit
job losses, if any, among Nkomati’s roughly 160 employees and may result in the creation of additional
employment in the surrounding community. Should the business rescue fail to ensure Nkomati’s survival, it
should nevertheless result in a better return for Nkomati’s creditors than would follow from Nkomati’s immediate


Notwithstanding the above, Afrimat continues to believe that UCP’s operations, including those of Nkomati, fit
the Company’s strategy and will provide it with access to additional services and commodities and expand its
current product offering in the bulk commodities segment.

The business rescue application does not directly impact on the Scheme, which is due to be presented to UCP
shareholders for their approval at a general meeting on 9 October 2020. In addition to such shareholder
approval, the Scheme remains subject to the fulfilment of various material conditions precedent outlined in the
Circular, including, inter alia:

 -   that the Mpumalanga Economic Growth Agency, as minority shareholder in Nkomati, agrees to the terms
     of the strategic and mining management agreement to be concluded with Afrimat, as previously approved
     by the UCP Board on 20 March 2020, to the reasonable satisfaction of Afrimat;

 -   that written consent to the transfer of UCP shares in terms of the Scheme be obtained from the Industrial
     Development Corporation of South Africa and ABSA Bank Limited (collectively, the “Lenders”) in terms of
     the change of control provisions under their respective loan/funding agreements with subsidiaries of UCP
     and that the Lenders agree not to proceed in foreclosing on outstanding debt due by those subsidiaries;

 -   that all regulatory approvals required to implement the Scheme are obtained, including (i) the Takeover
     Regulation Panel issuing a compliance certificate in terms of section 121(b) of the Companies Act; and (ii)
     the relevant competition authorities granting such approvals as are required in terms of the Competition
     Act, No. 89 of 1998 and other applicable laws to implement the Scheme, either unconditionally or subject
     to conditions acceptable to Afrimat.

The board of directors of Afrimat accepts responsibility for the information contained in this announcement which
relates to Afrimat and confirms that, to the best of its knowledge and belief, such information which relates to
Afrimat is true and this announcement does not omit anything likely to affect the importance of such information.

Cape Town
5 October 2020

PSG Capital

Date: 05-10-2020 05:09:00
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