Ashanti tries to shake off cash crisis with hedge-fund deal
The agreement will help to free the Ghanaian-based company from the crippling liquidity crisis that engulfed it after the bullion price soared, pushing its hedge book deep into the red.
It may also pave the way for a formal bid from Lonmin, the mining rump of Tiny Roland's Lonrho, which last month made a revised conditional offer of $670m (pounds 419m) for Ashanti. In return for the hedging standstill, Ashanti said that its counterparties would be issued with unlisted warrants, which, if fully converted, would give the holders about 15 per cent of the company.
Analysts said they were waiting for more news from Ashanti tomorrow, when the company is scheduled to give details of its trading in the quarter to 30 September.
Sam Jonah, Ashanti chief executive, said: "We are pleased we have reached agreement with our counterparties that removes the uncertainty surrounding potential margin calls on the company. In taking warrants ... our counterparties are demonstrating their confidence in Ashanti's vision and capacity to deliver its future plans."
The standstill deal extends a series of short-term deals, first announced on 5 October.
Ashanti said that no collateral needed to posted against margin calls through to the end of December 2002.
After that date, the company's margin limits would be twice current levels, or about $560m, and for 2004, one and a half times current limits, or $420m.
The warrants held by the counterparties are exchangeable into Ashanti shares at a subscription price of $4.75, their closing price last Friday. The warrants represent 19.8 million shares and will be issued in three tranches, with expiry dates through to 2005.
Yesterday's breakthrough follows intensive negotiations by officials from the Ghanaian government, which holds 20 per cent of the company.
At the height of the hedging crisis, a delegation from Accra travelled to London for talks with the banks and Lonmin officials.
Officials from Lonmin, which holds a 32 per cent stake in Ashanti, were unavailable for comment yesterday.
Ashanti and the Ghanaian government have said that they would not fully consider the Lonmin offer until its hedging crisis was resolved. Similarly, Lonmin said its approach was dependent on the target company reaching a deal with its bankers.
Lonmin shares ended 6p higher yesterday at 618p.
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