Northam Platinum has acquired 2.5% of Zambezi Platinum’s issued preference shares from Coronation Asset Management, valued at R200 million.
The preference shares, acquired at R49.46 per share, were issued by Zambezi Platinum in 2015, in terms of Northam’s black economic empowerment transaction, which increased Northam’s empowerment equity level to 31.4%.
Northam considers the preference shares to be a high-yield instrument with a credit risk profile that matches that of the company.
The investment will also generate a high return without the introduction of significant third party risk; provides Northam with the option to access liquidity by disposing of the preference shares; partially hedges Northam against the potential future liability presented by the guarantee provided to preference shareholders in respect of preference shares; and will reduce the net finance charges and liability included in Northam’s consolidated financial statements.
Further, if Zambezi chooses to redeem the preference shares with ordinary Northam shares, Northam will benefit from the discount applied to its ordinary shares.
“The preference shares offer an attractive yield whilst acting as a partial hedge against any potential financial liability which could arise in respect of the guarantee that Northam provided to the holders of preference shares in terms of the Northam BEE transaction,” says Northam Platinum chief executive Paul Dunne.