Bloomberg News

Lonmin Wins Support for $817 Million Share Sale to Cut Debt

November 19, 2012

Lonmin Plc (LMI), the third-largest platinum producer, won support from shareholders including biggest investor Xstrata Plc (XTA) for a proposed $817 million stock sale aimed at helping it avoid breaching pledges to creditors.

“We can now move forward, with confidence, continuing our delivery of the Lonmin Renewal Plan,” Chairman Roger Phillimore said in a statement today. Of the 78 percent of shares voted, 91 percent were in favor of the plan, the Johannesburg-based company said.

Lonmin, which posted a $698 million loss for the year through Sept. 30, has said the share sale is the best way to help repair its finances and avoid breaching debt covenants after a six-week strike in August and September cut production. Xstrata said last week it will back the offer provided the company makes board and management changes to stem “the destruction of value.”

The shares gained 9.3 percent to 515 pence at the close in London, the biggest advance since June 6 and paring Lonmin’s decline this year to 47 percent.

Banks agreed to amend loan facilities on condition that the share sale is completed, Lonmin said Nov. 13. Without the amendments, Lonmin may breach banking covenants, it said. Net debt climbed to about $550 million at the end of October and will rise further in the next few months, the company said.

Reverse Takeover

Lonmin is offering nine shares for every five held at a price of 140 pence. It rejected two proposals by Xstrata, including a reverse takeover that would have seen Lonmin take on Xstrata’s platinum and alloys assets.

Acting Chief Executive Officer Simon Scott on Nov. 9 announced a company renewal plan that includes cutting spending and production targets to cap debt as costs rose. Workers ended the unauthorized strike at Marikana on Sept. 20 after the company committed to pay increases of between 11 percent and 22 percent. The plan includes a review of the management structure, Lonmin said Nov. 9.

CEO Ian Farmer has been away from work since mid-August for a treatment of a “serious” illness the company hasn’t detailed.

Xstrata said on Nov. 9 Lonmin has “suffered longstanding operational problems” and that it’s concerned the business doesn’t have the management to ensure a sustainable future.

To contact the reporters on this story: Carli Cooke in Johannesburg at clourens@bloomberg.net; Firat Kayakiran in London at fkayakiran@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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