Ashanti strikes debt relief deal

Ghana-based Ashanti Goldfields (ASL-N) has struck a deal with the holders of US$219 million worth of the company’s outstanding 5.5% exchangeable guaranteed notes due on March 15, 2003.

Under the deal, Ashanti plans to swap about a quarter of the bonds, worth about US$55 million into equity via the issue of shares at US$3.70 apiece. The remaining 75% of the bonds will be exchanged for new exchangeable notes due in June 2008 and bearing interest of 7.95%.

Holders of the new notes will be able to exchange them for Ashanti shares at any time. The exchange price will be the higher of: US$5.03 (equal to 1.3 times the volume-weighted average closing price of Ashanti’s global depositary securities (GDS) for the month preceding the deal announcement); or 1.25 times the volume-weighted average closing price of Ashanti’s GDS on the New York Stock Exchange for a month from the announcement date.

The notes will be mandatorily redeemable by Ashanti in semi-annual instalments of US$12 million beginning at the end of 2003. Ashanti can also redeem an additional US$12 million worth of the new notes on each of the semi-annual redemption dates.

A company adviser told Reuters that under the plan, bondholders would no longer be able to demand repayment in the case of a takeover of Ashanti — not unless an acquisition hurt the merged firm’s creditworthiness.

The restructuring also contains a diluted “change of control” clause, which would make the company a more attractive target for potential takeovers. Remaining as an obstacle to any such deal is the Ghanaian government, which holds a 20% stake in the miner, plus a “golden share” allowing it to veto any takeovers or mergers.

Many analysts blamed the “golden share” for quashing the October 1999 takeover bid by Ashanti’s majority shareholder, U.K.-based Lonmin with a 32% stake. Lonmin offered US$7 per share for the remaining stake in the company, just as the price of gold shot up to US$325 per oz. from 20-year lows, pushing Ashanti’s aggressive hedging policy underwater and driving Ashanti shares to US$2.

The restructuring deal is subject to shareholder approval.

In December, Ashanti said it had reduced its revolving credit facility to US$55 million and secured an extension of its working capital facilities of US$25.4 million up to the end of 2002.

Ashanti is currently seeking extensions of margin free trading arrangements with its hedge counterparties. The company is looking for a moratorium on margin calls unless another hedge counterparty calls for margin. So far, four of the company’s eleven hedge counterparties have agreed.

In mid-afternoon trade on the New York Stock Exchange Ashanti shares were up a dime to US$3.80.