Ashanti Gilds Its Balance Sheet With Refinancing Deal

Ashanti Goldfields Company Limited has concluded a conditional deal to refinance $219 million worth of convertible bonds in an effort to repair its balance sheet.

Ashanti said its creditors have agreed to extend the maturity of 75 percent of the bonds currently due in 2003, by five years.

A further $54.6m of the debt would be exchanged for equity in the company by the issue of Ashanti shares at a market value of $3.70.

The deal remains conditional on the approval of Ashanti's shareholders, as well as that of major creditors and counterparties on the company's substantial hedge book.

Ashanti is owned 19 percent by the government in Ghana and 32 percent by Lonmin, the mining subsidiary of the Lonrho conglomerate.

Ashanti - once one of the world's largest goldminers - was pushed to the brink of default in 1999 when the gold price moved against its bets in the futures market.

That prompted a wave of calls on its hedge book and a collapse in the value of its shares.

Sam Jonah, Ashanti's managing director, told the Financial Times he hoped the deal would place Ashanti on a firmer financial footing and end speculation about its ability to withstand the level of cash redemptions likely should the company's share price not recover by 2003 - when the bonds are currently set to mature.

The objective, he said, was to match Ashanti's debt profile with cash flow from its mining assets across the African continent, increase its access to working capital from finance institutions and ease its ability to take part in industry consolidation.

"There was one big uncertainty over the share price, this perception that come 2003 when the bond had to be redeemed, we would not be able to do so. This is the lifting of one major uncertainty," Mr Jonah said.

During negotiations, bondholders had expressed a wish, he added, to see margin free trading on Ashanti's hedge book extended beyond the end of this year the time limit for a previous agreement with counterparties.

Four out of 11 active counterparties have agreed to do so already.

Bondholders would also like to see the government of Ghana relinquish the golden share it holds in the company and which gives it powers to intervene in corporate decisions.

So far it has proved reluctant to do so, however this was not an explicit obstacle to the conclusion of the refinancing deal, Mr Jonah said.