Shareholders asked to inject P28m into Pula Steel
Brian Benza | Tuesday June 27, 2017 18:00
Judicial manager, Vijay Kalyanaraman said creditors of Pula Steel, who are owed P100 million, yesterday gave him the green light to seek the P28 million injection from shareholders.
Pula Steel is currently owned by BCL (67%), Verma Family (22%) with the remainder held by the Citizen Entrepreneurial Development Agency (CEDA) as well as a company called Wealth Creations.
Shareholders have upto July 14 to decide if they will inject more money into Pula Steel.
However, BCL will not be eligible to participate in the capital injection as it is under liquidation and will have to cede its shares to the remaining shareholders before the funds are raised. “BCL has agreed to cede its shareholding to the other owners as per the shareholders’ agreement.
If the existing shareholders decide to exercise their rights and buy the shares, then the Verma family will become the majority shareholders in Pula Steel. From there, the shareholders will be required to inject the P28 million pro-rata for the company to restart operations as well as pay off a portion of the P100 million owed to creditors.
The remainder of creditors will be expected to be paid when the company is fully back in operation,” said BCL provisional liquidator, Nigel Dixon-Warren.
According to Kalyanaraman, if the remaining shareholders opt not to exercise their rights and no other investors express interest to buy Pula Steel shares before the next creditors meeting slated for August 4, Pula Steel then will be placed into liquidation. Although BCL is currently the biggest shareholder, it is also the biggest creditor owed about P58 million from a guarantee the mining company had granted on a Pula Steel loan from a local bank.
CEDA is the second largest creditor with the agency owed P15 million in shareholder loans, Botswana Power Corporation (P10 million), scrap metal suppliers (P7 million), employees (P3 million) while an Indian company that provided expatriate workers to Pula Steel is owed P6 million.
All employees were retrenched March this year when the company went under judicial management.
On the issue of the value of BCL’s shares in Pula Steel, Dixon-Warren said he expects the three other shareholders to table a ‘fair value’ offer, which is likely to be minimal since the company is not in operation.
“If the other three shareholders decide to exercise their rights and buy the shares, I will make a determination on the value of the shares looking at the offer prices.
The Verma family will become the largest shareholders in Pula Steel and will resultantly have to inject the bigger part of the P28 million,” he said.
Pula Steel was the first company in the country to process scrap metal into intermediate products called billets and was a milestone under BCL’s corporate strategy, Polaris II, that hoped to expand the Mine’s portfolio to develop an iron production circuit.
The company was setup at an initial cost of P130 million before an additional P53 million was injected into the firm.