Bowman Gilfillan acted for the secured lenders

One of the biggest and most complex business rescues brought under the new Companies Act of 2008 has come to a successful conclusion, in the process saving jobs and highlighting the important role that banks play in business rescue proceedings.

Southgold Exploration, which filed a resolution in 2012 placing itself in business rescue, had its business rescue plan approved by creditors on 11 July 2013, which ultimately resulted in the company terminating its business rescue on 1 July 2014 so that it could continue to operate.

Claire van Zuylen, Partner at pan-African corporate law firm, Bowman Gilfillan, which acted for Standard Chartered Bank in London and Credit Suisse (AG), commented, “The restructuring will result in some 2 000 employees, who were initially retrenched in 2012 when the Burnstone mine went into care and maintenance, being re-employed at the mine when operations re-commence.

“Without the input of the secured lenders, Credit Suisse and Standard Chartered Bank, in terms of advancing post-commencement financing and permitting the unsecured creditors a dividend that they would not otherwise have obtained, Southgold would have been forced to commence liquidation proceedings.”

South African company Southgold Exploration is a wholly-owned subsidiary of Toronto-based Great Basin Gold (GBG) Limited, which is an international mining company engaged in the exploration and development of gold properties. Southgold’s principal asset is the Burnstone mine in Mpumalanga.

During August 2012, GBG suspended active production at Burnstone in the hope of selling the mine in order to settle creditors. Seeking protection from creditors in the interim period, Southgold filed a resolution in 2012 placing itself in business rescue, and commenced proceedings under Canada’s Companies’ Creditors Arrangement Act, which is the equivalent of South Africa’s business rescue proceedings.

Standard Chartered Bank and Credit Suisse worked closely with the business rescue practitioner appointed to supervise Southgold, and advanced significant post-commencement financing to enable the successful business rescue, which included restructuring Southgold’s debt and equity.

According to Ms van Zuylen, “The restructuring had cross-border implications in that it involved the restructuring of debt owed to Canadian, Swiss and English creditors in addition to South African creditors.”

The restructuring involved banking and finance law, insolvency and restructuring law, corporate law, litigation and mining law issues. Documents were governed by English law and South African law (prepared by Bowman Gilfillan), and Cayman and Swiss law (drafted by local counsel).

The Bowman Gilfillan team comprised: Lionel Shawe and Lisa Botha (Banking and Finance), Claire van Zuylen and Sizwe Msimang (Insolvency and Restructuring law), Alistair Collins, Marc Pinchuck, Candace Hennessey, Johan de Wet, Ingrid Sinclair, Claire Tucker (Mining and Regulatory), and John Sahli and Clement Mkiva (Litigation).