G Steel Plc, a financially troubled hot-rolled coil maker, will float 8.85 billion new shares in a debt-for-equity swap with creditors as part of its $534-million debt restructuring plan.
Garas: Production hike planned
Chief executive Ahab Garas, appointed the head of G Steel in early February, said bond holders and trade creditors would ultimately hold 40% of the company's stock. The company currently has 13.9 billion shares outstanding.
Under the restructuring plan, 3.2 billion shares will be allocated to investors in the company's $170-million senior bond due Oct 4. Another 5.6 billion shares will be offered to trade creditors holding debt of $300 million.
Based on G Steel's market price of 0.37 baht per share on Mar 25, the swap represents a recovery rate of 20% for creditors. The plan is subject to final approval from G Steel shareholders later this year.
The restructuring plan would impose a 30-month silent period on the creditholders accepting the equity swap. Equity would be in the form of non-voting depository receipts, with the company projecting a recovery value for creditors ranging from 20% to 100%, depending on the appreciation of share values post-restructuring.
G Steel missed an interest payment on the senior bonds last October, following a missed payment on a bank loan last April.
The firm, founded in 1995 by Somsak Leeswadtrakul, reported a loss of 8.58 billion baht last year on revenues of 25.1 billion, compared with a 2008 loss of 1.23 billion on revenues of 41.7 billion.
Mr Garas said the plan would be critical for the successful restructuring of an additional $64 million in secured loans owed by Oriental Access, a wholly owned subsidiary of G Steel.
G Steel chief financial officer Ari Levy said the Oriental Access debt would be paid in cash received from new strategic partners. He said G Steel is in talks with a number of potential partners, including Japan's Mitsui & Co.
"But strategic partners will not be willing to inject the money into G Steel until the first part of the financial restructuring is concluded," said Mr Levy.
G Steel, in a notice to the Stock Exchange of Thailand yesterday, said Oriental Access must make a $10-million repayment by May 1 and a $20-million repayment on Sept 1. Final payment of $25 million in principal and all outstanding interest and fees will be due Jan 3. The debt was cut by $8 million in principal and $4 million in interest after the claim and sale of 850 million G Steel shares pledged as collateral.
Mr Garas and Mr Levy were appointed to G Steel from Turnaround Steel Management, a consultancy leading the financial restructuring and rehabilitation plan of the company. Mr Somsak is vice-chairman of the firm.
"So far, several of G Steel's key creditors have already expressed preliminary support for this plan," Mr Garas said, adding that the plan should be completed by the second half of 2010.
Mr Levy said the plan had been structured to benefit all stakeholders.
"We are confident that the restructuring will be successful as the plan is designed for the benefit of new and existing shareholders without dilution effects," he said.
"Two major reasons why we are here is that we believe in the company's good assets while the steel industry in Thailand and Southeast Asia has great growth potential," he said.
G Steel and its subsidiary G J Steel Plc have a capacity of 3 million tonnes of hot-rolled coils per year, but limited working capital and the economic crisis forced the firm to cut production. Production would be raised within 90 days following the recapitalisation.
Shares of G Steel closed 29/03/2010 on the SET at 0.38 baht, unchanged, in trade worth 19 million baht.
