TRUSTCO GROUP HOLDINGS LIMITED - Trustco disposing of a minority interest in Trustco Finance (Pty) Ltd

Trustco disposing of a minority interest in Trustco Finance (Pty) Ltd

TRUSTCO GROUP HOLDINGS LIMITED
Incorporated in the Republic of Namibia
(Registration number 2003/058)
Registered as an external company in South Africa
(External registration number 2009/002634/10)
NSX share code: TUC
JSE share code: TTO
OTCQX share code: TSCHY
ISIN Number: NA000A0RF067
(“Trustco” or “Company”)


TRUSTCO GROUP HOLDINGS LIMITED ("TRUSTCO") DISPOSING OF A MINORITY
INTEREST IN AN INVESTMENT TRUSTCO FINANCE (PTY) LTD


1. Introduction

Trustco shareholders are advised that Trustco has undertaken a strategic decision to divest
a portion of its investment in its banking and finance portfolio. TBN Holdings Limited ("TBN"),
Trustco’s main investment vehicle in the abovementioned portfolio, has entered into an
agreement with Finbond Group Limited ("Finbond") in terms whereof Finbond would acquire
49% of Trustco Finance (Pty) Ltd (“Trustco Finance”) (the "Finbond Transaction"). Trustco
Finance is a wholly owned subsidiary of TBN, and TBN is a wholly owned subsidiary of
Trustco.


Trustco is a Namibian public company listed on the Namibian stock exchange, the
Johannesburg stock exchange, and OTCQX stock exchange in New York.


2. Nature of the Business and Rationale for the Transaction

Nature of the business of Trustco Finance

Trustco Finance provides educational loans to students enrolled inter alia at the Institute for
Open Learning (Pty) Ltd ("IOL"), the largest private distance learning tertiary education
institution in Namibia.


Trustco Finance provides student loans for up to 60 months. Trustco initially invested in
Trustco Finance in 2005 with an initial loan portfolio of NAD 5 million that has grown during
the past 18 years to become a preferred student loan lender in Namibia. Currently, Trustco
Finance has a gross loan portfolio exceeding NAD 650 million and the loan book peaked at
over NAD 771 million. Since 2005, Trustco Finance has disbursed loans of approximately
NAD 1.3 billion (loan amount) to more than 62 000 students, and collected more than NAD
2.5 billion in instalments. The proposed divestment represents 2.47% of the total Trustco
investment portfolio as at 31 August 2022.


Trustco Finance’s key strengths inter alia include:
    •   A skilled senior management team with extensive experience in student loans;
    •   A proven and scalable online student loan offering;
    •   Focused cash-generative student loan products; and
    •   Robust collection technologies and state of the art analytical tools.


With the assistance of a supportive European and local long-term funding group, Trustco
Finance provides tailor-made educational lending to students that add value to their
livelihoods and financial wellbeing.


Nature of the business of Finbond

Finbond is a leading South African and North American financial services institution that
specialises in designing and delivering unique value and solution-based credit products
tailored to borrower requirements rather than institutionalised policies and practices.


Finbond is a credit provider with both brick-and-mortar and online operations. Finbond
conducts its business through a total of 589 stores (397 in South Africa, 192 in North America)
with online offerings in both South Africa and 6 states in the United States of America.




The rationale for the Finbond Transaction includes:
•    As Trustco has transitioned from managing fully owned and operated businesses to
     an investment entity focused on a diversified portfolio of assets in emerging markets,
     this transaction represents an opportunity to recycle capital on a long-held investment
     in line with Trustco’s overall investment strategy. By actively managing and optimizing
     its investment portfolio, Trustco aims to drive long-term growth and create value for
     investors.
•    Trustco's business model revolves around investing, partnering, and realizing
     investments within its investment portfolio. This approach allows Trustco’s investments
     to leverage expertise from different stakeholders and to ensure the continued growth
     and success of its portfolio companies.
•    The Transaction presents an additional avenue for growth in Trustco’s banking and
     finance portfolio by strategically enhancing its valuation through enabling its
     investment to expand its lending operations, capture new opportunities, enhance its
     market presence, and further diversify its revenue streams.


The use of the proceeds of the purchase price:
•    The purchase price proceeds will be applied in the normal course of Trustco’s business.


3.   Salient terms

The salient terms of the Finbond Transaction are as follows:
•    The purchase consideration payable by Finbond will be R60 million for 49% of the
     shares in Trustco Finance, to be settled in cash.
•    50% of the purchase consideration set out above will be payable in cash on the
     signature of the definitive agreement on or before 31 July 2023.
•    The remaining 50% of the purchase consideration will be payable when the Balance
     Sheet of Trustco Finance as at 31 August 2023 has been restructured to reflect the
     intention of the Parties, and has been audited without any qualification or modification.
•    The anticipated effective date of the Transaction will be 1 August 2023.
•    Finbond intends to fund the purchase price from cash reserves.



4.     Conditions precedent

The Finbond Transaction remains subject to inter alia the following conditions precedent, to
be fulfilled by no later than 31 July 2023 or as soon as practical:
•    Finbond’s Board and Investment Committee Approval;
•    Trustco’s Board and Investment Committee approval;
•    All regulatory approvals as required; and
•    Finalisation of a satisfactory due diligence investigation.


5.     Financial Information

The net asset value and net loss before tax of Trustco Finance amounted to NAD 34 million
and NAD 179 million respectively, based on audited results for the year ended 31 August
2022. The audited results of Trustco Finance for the year ended 31 August 2022 were
prepared in accordance with IFRS.


The Trustco Finance portfolio company was valued at NAD 183 million in Trustco’s Audited
Annual Financial Statements as at 31 August 2022.



6.     Categorisation of the Trustco Transaction

The Finbond Transaction is categorised as a Category 2 transaction in terms of the JSE
Limited Listings Requirements, and Finbond is not related to Trustco or Trustco’s
subsidiaries and thus no related party, section 10 of the Listings Requirements,
consideration would apply. In this regard, this transaction is not subject to shareholder
approval.


Windhoek, Namibia,
2 June 2023
Komada Holdings (Pty) Ltd
Company Secretary and Investor Relations Services to Trustco Group Holdings
Limited




JSE Sponsor
Vunani Sponsors


NSX Sponsor
Simonis Storm Securities Proprietary Limited – Windhoek


OTCQX Sponsor
J.P Galda & Co – New York





Date: 02-06-2023 03:00:00
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