Home » Industry » PG Converts Debentures Into Equity

BUILDINGS material group, PG Industries Zimbabwe Limited, which has been implementing a scheme of arrangement that is expected to rid the troubled building materials supplier of debts and reposition it for growth, says it will convert US$7,1 million of debentures into equity for holders of the commercial paper.

In a statement to debenture holders, PG said the conversion of the debentures will result in an improved balance sheet position, and support for current trading activities.

It said the transaction will also boost operations to achieve a successful turnaround.

The PG board said it was “critical that the debenture conversion be implemented now pending sanction of the composite scheme, as most of the aspects of the scheme have already been implemented”.

“In accordance with the scheme of arrangement proposed by PG Industries Zimbabwe Limited and its debenture holders, on January 24 2014, the company will convert debenture holders’ debentures plus accrued and unpaid interest into equity in the company at a conversion price of US$0,001,” PG said.

“The total value is US$7 135 681 (made up of US$6 720 000 of capital and US$415 681 interest accrued). In 2013, in line with provisions of section 191 of the Companies Act (Chapter 2403), the company proposed a scheme of arrangement with its shareholders and different classes of creditors namely secured lenders, debenture holders, secured suppliers and concurrent creditors. In terms of the debenture holders scheme, debenture holders agreed to convert their debentures to ordinary shares on terms and conditions which were agreed to by shareholders at the shareholder scheme meeting incorporating an extraordinary general meeting on 14 March 2014,” the statement said.

In December 2014, PG Industries restructured operations as part of the scheme of arrangement.

It closed three of its branches, leaving its network to 15, from 18.

The decision to reduce its network could have been in response to reduced business in some parts of the country caused by subdued demand for building materials and related products.

The country continued to be affected by a liquidity crisis that is now entering its third straight year.

It has left many firms out of business, with consumers, many of them out of employment after their companies shut down, failing to purchase most of their requirements for housing projects.

PG Industries, which has interests in timber, glass, tiles production and related investments in Zimbabwe and Mozambique, said it had merged two key units into a single operating division after the approval of shareholders and creditors under a scheme of arrangement.

These are PG Building Supplies and PG Timbers.

A further business, PG Glass, would be divisionalised this year, while the firm was working on settling its dues to a minority shareholder before divisionlising Zimtile, one of the country’s largest tiles producers.

PG did not give a timeline for divisionalising Zimtile when it gave a shareholder update recently.

“PG Building Supplies and PG Timbers were successfully merged into one operating division of PG Merchandising Limited,” the group said in the update to shareholders.

“The branch network was reduced from 18 to 15. PG Glass will be divisionalised from January 2015. Zimtile will only be divisionalised after settling amounts due to the former minority shareholder,” said a shareholder update in December.

PG raised just over US$1 million through an asset disposal programme that was used to settle US$336 169 in bank loans, it said, with the remainder being channelled towards replenishing stocks and purchasing raw materials.

A US$3,1 million secured bank loan was settled in full following a propertydebt swap last year.

The group, which also raised US$1,1 million in fresh capital in June 2014, said it will be restructuring its debt going forward, with about US$960 000 in short-term debts being converted to a three year facility.

Source : Financial Gazette