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    Home»News»Gijima in dire financial straits

    Gijima in dire financial straits

    News By Duncan McLeod28 March 2013
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    Robert Gumede
    Robert Gumede

    It’s not going to be a good Easter weekend for the thousands of employees of JSE-listed services group Gijima, which announced shortly before markets closed on Thursday that it was embarking on a rights offer in an effort to avert financial disaster.

    The company, which is chaired by politically connected businessman Robert Gumede, says its board has “resolved” to raise R150m by way of a renounceable rights offer to its shareholders in an effort to recapitalise the business “to ensure compliance with all of its funding covenants” and to finance its working capital requirements.

    The rights offer is being done at 5c/share, a fraction of the 18c the Gijima share price was trading at before the announcement was made. Gijima has twice postponed announcing its financial results in the past two weeks, finally announcing on Thursday that it had made a loss of R106m from continuing operations for the six months ended 31 December 2012, from a loss of R69,6m the year before.

    The news of the poor results and of the rights offer sent the share plummeting in the moments before trading closed for the Easter weekend, ending down more than 16% at 15c/share. However, the highest bid in the market after the close of trade was just 8c/share, suggesting a further slide when markets reopen on Tuesday. The counter has declined by two-thirds of its value in the past year.

    In a statement to shareholders, Gijima says its GijimaAst Finance business owes Futuregrowth Asset Management and Investec Asset Management R255m. Futuregrowth and Investec have agreed to provide “temporary leniency in respect of noncompliance by GijimaAst Finance with such covenants”.

    “One of the conditions for which such leniency is to be granted is that sufficient equity capital must be raised by Gijima, and funds made available by Gijima to GijimaAst Finance, to ensure that GijimaAst Finance will meet the required minimum asset cover ratio and have sufficient funding reserves to cater for unforeseen risks.”

    Gijima intends to offer 3bn shares under the rights issue at a subscription price of 5c/share in a ratio of about 310 rights-offer shares for every 100 shares held by Gijima shareholders. It says the offer is expected to be concluded in the current financial year.

    Just over 70% of shareholders have agreed to support the rights offer. However, the main shareholders have provided this undertaking on the provision that Gijima is “not placed under supervision for business rescue in accordance with the Companies Act or into provisional or final liquidation prior to the close of the rights offer”.  — (c) 2013 NewsCentral Media

    • More to follow after the Easter long weekend
    Gijima Robert Gumede
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