02 Jun 2015
Sasfin strongly rejects claims that it is responsible for the position Evraz Highveld Steel and Vanadium Limited (Highveld) currently finds itself in.
At no time has Sasfin Bank (Sasfin) placed the business rescue proceedings of Highveld at risk and Sasfin strenuously rejects this accusation. Sasfin has, over the last couple of months, done its utmost to try and find a funding solution for the business after it was badly neglected for a number of years.
Highveld is 85% owned by Evraz plc (Evraz), a global company with consolidated revenues for the year ended 31 December 2014 at US$13.061 billion, and a consolidated EBITDA amounting to US$2.325 billion. Evraz is one of the world’s top steel producers with operations in the Russian Federation, Ukraine, USA, Canada, Czech Republic, Italy, Kazakhstan and South Africa.
Sasfin has attempted to provide stability to Highveld through various means and to ensure the business remains a going concern. Sasfin rejects any insinuation that it is responsible for the financial predicament of Highveld or has at any time frustrated or sabotaged the business rescue proceedings of Highveld. With reference to the statement issued by Highveld dated 27 May 2015 and released on the Stock Exchange News Service and to a subsequent article in City Press on 31 May 2015 entitled “Sasfin nearly sinks Evraz Highveld”, Sasfin would like to outline the facts as a matter of record.
The reasons given for Highveld’s failure are set out in its initial announcement following its decision to go into business rescue proceedings in which it cited historical operational difficulties and sustained financial losses within a capital constrained operating environment. Highveld also cited that its financial position has further been negatively impacted by weakened global steel and vanadium markets and a severe reduction of domestic steel demand.
Sasfin has acted at all times in good faith to find a funding solution for Highveld. The placement of Highveld into business rescue proceedings changed the outlook for the business and altered its risk profile. Prior to Business Rescue, Sasfin engaged with Highveld to establish means to assist with a financial solution that would enable Highveld to continue as a going concern. This was without success.
Timeline of events
After Sasfin had been assured by Highveld that its business would be recapitalised, Sasfin entered into an Invoice Discounting Agreement on 18 September 2014 which was scrutinised by Highveld’s legal team.
During the past three months, after Highveld had approached Sasfin for additional funding, Sasfin proposed increasing its facility to R300 million (subject to board approval) provided that Evraz would loan an additional R50 million to Highveld and subject to Evraz providing Sasfin with an option to acquire its interest in the company.
No response was forthcoming. Instead, the Directors of Highveld decided to place the company under Business Rescue which resulted in a breach and the termination of the Agreement.
Subsequently, Sasfin entered into discussions with Highveld management and its business rescue practitioners to provide post commencement Business Rescue financing. Sasfin was advised by the Chairman of Highveld and a senior Representative of the Business Rescue Practitioners that this finance was needed urgently as it would be unable to pay its staff, utilities and other commitments that were due in a number of days without this assistance from Sasfin.
Accordingly, Sasfin, in consultation with the Chairman of Highveld and representative of the Business Practitioners, offered (again, subject to board approval), to provide post-commencement financing of R230 million subject to the acquisition of the Highveld shares owned by Evraz for R1 as these shares had lost all value.
Evraz was not prepared to accept the terms unless Sasfin also purchased their claims on the loan account against Highveld.
Sasfin was open to this suggestion provided that the value of the loan account was determined in relation to Highveld’s financial situation. Evraz, however, subsequently also rejected this proposal.
Sasfin advised Highveld of the termination fees payable in terms of the Invoice Discounting Agreement which they disputed. Sasfin offered without prejudice, to reduce these fees which proposal the Business Rescue Practitioner also rejected. The amount in dispute is not material in relation to the survival of Highveld.
Highveld then demanded to collect the debtors ceded to Sasfin directly to facilitate its cash flow, to which Sasfin agreed.
Highveld subsequently extended its demands by insisting that the debtors be ceded back to it outright. Sasfin was prepared to accede to that demand too, conditional upon it receiving limited cash security in exchange for the security of the debtors’ book. Despite this offer, Highveld launched an urgent application in the High Court on 28 May 2015 demanding release of the debtors’ book.
That application was subsequently withdrawn after Highveld agreed to pay an additional amount to Sasfin.
Litigation may regrettably ensue in respect of which Sasfin’s rights are reserved.
Issued on: 2 June, 2015
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