Highveld Creditors Consider Alternative Offer, Postpone Vote on Business Rescue Plan

Engineering News reported that creditors have voted to postpone a vote on the Evraz Highveld Steel and Vanadium business rescue plan for two weeks. The group, which agreed on the decision unanimously, also raised questions about the preferred bidders commitment to South African suppliers and whether an alternative bid should also be considered.
As quoted in the market news:

The rescue plan, which was published on September 16, included a R405-million buyout offer from International Resources Limited (IRL), of Hong Kong, including an interlinked offer for the Mapochs mine, which supplies iron-ore to the Mpumalanga steel mill, but which was undergoing a separate business rescue process.
The plan had been endorsed by both government and labour, with National Union of Metalworkers of South Africa general-secretary Irvin Jim telling a well attended meeting in Sandton that the plan offered a “serious prospect to win the day and turn around what looked like a very bleak picture”.
Creditors, nevertheless, concurred with an adjournment motion – placed before the meeting by Evraz subsidiaries Mastercroft, Highveld’s largest shareholder, and East Metals, its single largest creditor – on the basis that it would provide more time to get to grips with the implications of the plan and IRL’s offer. Particular concern was raised about whether IRL would continue to engage with Highveld’s traditional supplier base on the completion of the transaction.
Fears were expressed that, despite the role that creditors were playing in rescuing the business, South African suppliers could be replaced by Chinese competitors. The IRL offer, which was submitted on August 28, had been broken into two scenarios: a sale by means of a scheme of arrangement, and the sale of the business as a going concern. Should creditors accept neither, there was a further option to wind down the company.
Under the first two scenarios, R350-million had been set aside for creditors and R150-million to settle an emergency loan provided by Industrial Development Corporation at the start of the rescue process. Under the scheme offer, IRL would also pay R20-million to buy all of the issued shares in the company, a component that was absent for the purchase of the business as a going concern.

Click here to read the full Engineering News report.