Murray & Roberts Limited (MRL) is selling its mining businesses in terms of a business rescue plan that was approved by creditors this week, but there will no distribution to shareholders.
MRL was placed in business rescue on November 22, 2024, following significant liquidity constraints by the South African-based international engineering and construction group over a prolonged period.
The business rescue practitioners said Thursday that creditors had approved MRL’s business rescue plan on April 8, and in terms of this plan, MRL’s main assets, its mining businesses, would be sold to a consortium of investors led by South Africa-based asset management firm Differential Capital. Thereafter, MRL would be wound up.
The Differential investors have already invested in MRL with post-commencement funding, which has provided the group with sufficient cash flow to continue its operations, allowing the business rescue process to take place.
Assets being sold include Murray & Roberts Cementation, which does contract shaft sinking, mine development and other specialised mining operations; Cementation Canada; and Terra Nova Technologies, which provides services such as designing and supplying conveying systems, crushing plants, and other equipment for the mining and other heavy industries.
The business rescue practitioners said proceeds from the sale of these assets were expected to be enough to repay all secured creditors, with unsecured creditors expected to receive between 5 and 10 cents in the Rand.
As the proceeds were not sufficient to fully settle unsecured creditors, there would be no distribution to shareholders of the company, the business rescue practitioners said.
“The implementation of the business rescue plan will render the company commercially insolvent, and the board of directors has resolved that it is recommended to shareholders that a creditors’ voluntary winding up of the company be pursued,” a statement said.
Murray & Roberts CEO Henry Laas said earlier that “the Differential investors are well capitalised and have expressed their appreciation of Murray & Roberts’ expertise as a provider of mining contracting services, which rivals the best in the world, and the importance of preserving this capability.”
Proceeds from the sale of the businesses were expected to be enough to settle MRL’s secured creditors that include a consortium of four South African banks, as well as the providers of post-commencement funding.
The disposal proceeds would also cover retrenchment packages for staff at the group’s head office and at Optipower division. The Differential Investors may grant shareholders an opportunity to co-invest fresh equity into the new ownership structure, alongside the Differential Investors.
The group’s problems started when its cash-generating ability was severely curtailed by the Covid pandemic due to business disruption and travel restrictions. It also did not receive dividends during the Covid period from its investment in the Bombela Concession Company, the company that holds the concession to operate the Gautrain.
By the end of the pandemic, the group debt in South Africa was about R2 billion. The pandemic also increased working capital requirements in the Australian business, Clough, but there was insufficient liquidity in the group, and Clough was put into voluntary administration.
The loss of Clough and RUC left the group with a highly geared balance sheet, and a deleveraging plan was formulated, which included the disposal of the investment in the Bombela Concession Company. This was undertaken and debt fell to R409 million.
However, liquidity problems continued. Then De Beers decided to review its operational plans at Venetia Mine in South Africa, resulting in the descoping of its contract with Murray & Roberts Cementation. This contract represented more than 50 percent of Murray & Roberts Cementation’s revenue, and this exacerbated the liquidity squeeze across the group’s South African operations.
BUSINESS REPORT