One of Many Bidders Low BallingAfrican Copper receives financing proposal from Zambia
2009-04-16 05:22 ET - News Release
Mr. Chris Fredericks reports
African Copper PLC has received an unsolicited offer of finance from Zambia Copper Investments Ltd. (ZCI), which remains open for acceptance at any time prior to May 20, 2009. In view of the legal agreements entered into with Natasa Mining Ltd. announced by the company in Stockwatch on April 9, 2009, African Copper does not intend to respond to the ZCI offer prior to the completion of the extraordinary general meeting of the company, which has been convened for May 7, 2009 (EGM), to approve the terms of the transaction reached with Natasa. However, the board has been advised that, particularly in light of the convening of the EGM, the terms of the ZCI offer must be publicly disclosed to enable the company's shareholders to reach an informed decision as to how to vote at the EGM.
Natasa has informed the company that if the shareholders do not approve the terms of the Natasa transaction at the EGM, Natasa will move very quickly to enforce its legal rights under its existing $1.5-million (U.S.) loan facility with the company's principal operating subsidiary (Messina Copper (Botswana) (Proprietary) Ltd.) and if Messina is unable to repay such existing loan (which loan has been guaranteed by the company) Natasa will enforce its security and commence formal insolvency proceedings. In such event, it is unlikely that there will be any assets available for distribution to shareholders.
In addition, the ZCI offer is subject to a number of conditions precedent (including the group's bondholders and major creditors agreeing terms acceptable to the company and ZCI) set out below, which may not be satisfied. It should also be noted that the documentation provided by ZCI reserves to ZCI termination rights in certain circumstances up until closing of the ZCI financing which the board anticipates could not take place until late June, 2009, at the earliest. Accordingly, there can be no assurance that terms could be agreed with ZCI and that therefore any funds would be advanced to and/or received by the company pursuant to the ZCI offer. Terms of the ZCI offer:
- A share subscription by ZCI for 676,570,543 new ordinary shares of one pence each at an issue price of one pence per share for gross proceeds to African Copper of approximately $9.9-million (U.S.), giving ZCI a post-offer interest in African Copper of 69.73 per cent;
- Provision by ZCI of a four-year secured convertible credit facility of $8.1-million (U.S.) with a coupon of 12 per cent per year and a conversion price of one pence exercisable at any time during its term;
- Provision by ZCI of a short-term, secured credit facility to African Copper of $2-million, bearing interest at a rate of 14 per cent per year;
- The continuation, for the benefit of bondholders, of $2.5-million (U.S.) of the company's outstanding Pula bond;
- In order to meet the immediate working capital needs of African Copper the ZCI offer provides for an advance of an interest-free, secured bridge loan of $2.5-million (U.S.). Upon completion of the ZCI offer, the bridge loan would be repaid out of the proceeds of the share subscription. It should be noted that the availability of funds pursuant to the bridge loan would be subject to the agreement of legal documentation and the implementation of security. It is unlikely that such documentation and security could be executed prior to the time that Natasa has said that it would enforce its rights referred to above.
ZCI proposes that African Copper's large trade creditors (the company's mining contractor and the engineering, procurement, contracting and management contractors) would be paid in cash 40 per cent of the monies owed to them (equating to approximately $3.8-million (U.S.) -- calculated assuming amounts due to such creditors equal approximately $9.6-million (U.S.)) and issued with 48,952,986 new ordinary shares of one pence each in full and final settlement of debts due from African Copper. Following completion of the ZCI offer, these creditors would have an interest of 5.04 per cent of the enlarged issued share capital of African Copper. Small creditors (understood by ZCI to represent approximately $4.6-million (U.S.)) would be repaid in full in cash from the proceeds of the ZCI offer as their debts become due.
ZCI proposes that the company's bondholders be paid 25 per cent of the face value of their bonds (equating to approximately $5.0-million (U.S.)) and retain existing bonds or be issued with new bonds equivalent to $2.5-million (U.S.) on terms and conditions, as a whole, no worse than the current African Copper bonds, with the balance of the bonds to be retired. Bondholders would also be issued with 97,905,971 ordinary shares of one pence each as final and total discharge of their debts due from African Copper. Following completion of the ZCI offer, Bondholders would have an interest of 10.09 per cent of the enlarged African Copper share capital.
Following completion of the share subscription, the company's enlarged issued share capital would comprise 970,288,457 ordinary shares of one pence each to be held as set out in the attached table.
Description New share structure ordinary shares % of totalShares issued to large trade creditors 48,952,986 5.04%Shares issued to bondholders 97,905,971 10.09%Existing shares in issue 146,858,957 15.14%Shares issued to ZCI 676,570,543 69.73%Total 970,288,457 100.00%
The numbers set out above assume that the convertible debt facility has not been converted into ordinary shares of African Copper. The company has included the numbers if the convertible debt facility was to be converted in full in the attached table.
Description New share structure following conversion of convertible debt facility ordinary shares % of totalShares issued to large trade creditors 48,952,986 3.2%Shares issued to bondholders 97,905,971 6.4%Existing shares in issue 146,858,957 9.6%Shares issued to ZCI 1,235,191,233 80.8%Total 1,528,909,147 100%
It is a condition of the ZCI offer that ZCI will appoint two non-executive directors, David Rodier and Jordan Soko, to the board of African Copper, one of whom would be chairman. Such appointment will take effect from the date of completion of the share subscription. In addition, ZCI intends that, upon signature of the bridge loan, three senior and experienced mining personnel be appointed into executive positions at the level immediately below the board.
ZCI have said that the ZCI offer is not subject to additional due diligence, has been approved by the board of ZCI and can be financed using ZCI's internal cash resources.
Conditions precedent to the ZCI offer
The ZCI offer is subject to certain conditions precedent including the following:
- African Copper and its subsidiaries arranging the compromise detailed above with its large creditors and bondholders;
- African Copper's agreement to the legal documentation (including security documentation) in relation to the share subscription and in relation to the bridge loan, the short-term facility and convertible debt facility;
- The management changes referred to above;
- The cancellation of the company's Toronto Stock Exchange listing;
- Any shareholder or regulatory approvals required by African Copper under the Companies Act, TSX or AIM rules;
- The approval of ZCI shareholders as required under the rules of the JSE. ZCI have said that they have received a comfort letter from The Copperbelt Development Foundation (CDF), which holds 71.5 per cent of the issued share capital of ZCI, that CDF intends to vote all of its shares in favour of all resolutions to approve the transaction.
We seek Safe Harbor.