LONDON (Alliance News) - International Ferro Metals Ltd on Tuesday said the business rescue plan aimed at salvaging some value from its troubled South African subsidiary has been approved by its creditors, but warned the outcome of the plan is still unknown.
The company placed its "financially distressed" subsidiary, International Ferro Metals (SA) (Pty) Ltd, into a Business Rescue earlier this year after being hit by strike action, falling ferrochrome prices, a fall in steel output driven by the economic slowdown in China and higher power costs.
A Business Rescue is a statutory means of enabling a financially distressed company to continue in business, under the supervision of a Business Rescue Practitioner, protected from its creditors. It means creditors who are trying to reclaim funds for whatever reason can not do so without going through the Practitioner, who will try to implement a plan to resolve the financial issues at the company.
The Practitioner, which submitted the plan that was accepted by creditors, will now work to close the sale agreements with Samancor Chrome Ltd before February 15 to try to raise the required funds to repay creditors.
Although Samancor Chrome has agreed to purchase the subsidiary, which holds all of the company's assets, the deal is still non-binding, and International Ferro is not sure exactly how much it will receive under the deal should it go ahead.
"The Business Rescue Practitioner will now seek to negotiate and execute the relevant sale agreements with Samancor Chrome Ltd as quickly as possible, but by no later than 15 February 2016, otherwise the BRP will need to revert to International Ferro Metals (SA) (Pty) Ltd's major creditors, Bank of China and the company's subsidiary International Ferro Metals SA Holdings (Pty) Ltd," said the company.
"The company reiterates that it currently is not possible to assess with any certainty what potential return may be received by the company because of uncertainties related to future costs and cash flows to fund the business rescue proceedings," International Ferro added.
Currently, the plan that was submitted to creditors assumes International Ferro will receive ZAR720.0 million from Samancor Chrome, comprised of ZAR650.0 million for the subsidiary and ZAR70.0 million for certain receivables of the company's Sky Chrome project.
However, International Ferro said the figure is "no more than an example and is not binding" - providing further uncertainty moving forward.
International Ferro shares remain suspended.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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