JSE-listed construction company Group Five has secured R650-million in short-term bridge funding.
The company said on Wednesday that it had also entered a creditors standstill agreement with regards to the secured short-term bridge funding.
The R650-million bridge funding, obtained from a consortium of local banks, is for a 12-month period.
The funding should address the mismatch between the short-term funding needs of Group Five, mainly as a result of its declining South African construction order book, the cash funding required to complete the Kpone contract, in Ghana, and the rate at which claims, debtors and non-current assets could be realised to fund outflows.
The bridge funding security is comprised of a pledge and cession in security by the group of its rights, title and interest in its manufacturing assets, its European Investments (namely its service concessions investments) and its European operations and maintenance businesses.
The standstill agreement reached with the funding consortium and an insurance partner aims to ensure that these parties do not terminate any of their existing facilities, cancel or reduce any available commitment, or limit in terms of their existing facilities, and to provide a temporary suspension of any enforcement action under the existing funding documents.
In addition to the bridge funding and standstill agreement, Group Five said it was continuing to improve its free cash position through the recovery of long-outstanding debts and the conversion of non-current assets and other cash-enhancing initiatives.
These cash recoveries and initiatives are expected to enhance the group’s cash position.
Group Five added that it did not believe it was prudent to rely solely on debt.
“The repayment of the bridge funding through shareholder funding options such as a potential rights offer or shareholders’ loans would prevent the unintended disposal of core group assets, providing the group with sufficient time to stabilise and further de-risk the construction businesses prior to any transaction in this segment in terms of the agreement reached with government . . . on transformation in the construction sector.”
The group said it would, in due course, “engage with shareholders and present various options for their consideration to identify the best course of action for financial support”.