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Restructuring of the Group's Debt – Partial Sale of Assets by a Subsidiary
VUNANI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/020641/06)
JSE code: VUN
ISIN: ZAE000163382
(“Vunani” or “the Company” or “the Group”)
RESTRUCTURING OF THE GROUP’S DEBT – PARTIAL SALE OF ASSETS BY A
SUBSIDIARY
1. BACKGROUND INFORMATION
In 2010 Vunani and Vunani Capital Proprietary Limited (“Vunani
Capital”) a wholly owned subsidiary of the Company, entered into
a debt restructuring agreements with their major lenders. The
debt restructuring agreements provided for a moratorium period on
debt and interest payments allowing Vunani and Vunani Capital to
settle a substantial portion of their respective debt obligations
on a sustainable basis with their lenders. The moratorium period
has ended and Vunani has agreed with its lenders to settle its
remaining debt obligations through the proceeds derived from the
disposal of its investment in Vunani Property Investment Fund
Limited (“VPIF”) (the “VPIF Investment”).
Vunani Properties Proprietary Limited (“Vunani Properties”), a
subsidiary of the Company owes an intercompany loan to Vunani
Capital in the sum of R59 770 928.00, (the Intercompany Loan”).
Vunani Properties holds 18 151 317 linked units in the issued
linked share capital of VPIF equal to approximately 15% of the
linked units in issue. The market value of the VPIF Investment
based on its most recent closing price of R9.00 cents per linked
issue is R163 361 862.
2. PROPOSED TRANSACTION
The shareholders of Vunani Properties have passed a resolution
approving the sale and unbundling of the VPIF Investment, subject
to regulatory approvals (the “VPIF Disposal”). The VPIF Disposal
will be executed through a private placement by an investment
bank. The proceeds from the VPIF Disposal will be utilised to
repay loans in Vunani Properties, including the Intercompany
Loan. The balance will be distributed to shareholders for
purposes of settling the Group’s remaining debt obligations with
its lenders as contemplated in paragraph 1 above.
Vunani intends to apply the proceeds derived from the VPIF
Disposal to reduce its debt obligations. This will result in a
substantial portion of the Group’s outstanding debt obligations
being settled.
The respective boards of directors of Vunani and Vunani
Properties have passed resolutions approving the proposed VPIF
Disposal. The board of directors of Vunani has received an
irrevocable undertaking from its majority shareholder, Vunani
Group Proprietary Limited, approving the VPIF Disposal.
3. RATIONALE
The rationale for the proposed VPIF Disposal is the intended
settlement of loans in Vunani Properties including the
Intercompany Loan and the substantial reduction of the Group’s
debt obligations.
4. EXECUTION OF THE TRANSACTION
An auction will be conducted by Investec Bank Limited. The
auction has resulted in the private placement of 2 812 903 units
to date. The trades will be executed as off market transactions
(block trades) through two members of the JSE Limited and will
settle on a T+5 basis through STRATE.
5. EFFECTIVE DATE
To date, the following VPIF units have been sold:
? 1 612 903 units were sold at 930 cents on 9 October 2012; and
? 1 200 000 units were sold at 900 cents on 11 October 2012.
The value of the VPIF Disposal to date is R25 799 978.
6. FINANCIAL EFFECTS
Statement of comprehensive income
The unaudited pro forma financial effects of the transaction, for
which the directors are responsible, on earnings per share
(“EPS”), diluted earnings per share (“DEPS”), headline earnings
per share (“HEPS”) and diluted headline earnings per share
(“DHEPS”) are provided for illustrative purposes only to show the
effect of the transaction as if the transaction had taken effect
on 1 January 2012. Because of their nature, the unaudited pro
forma financial effects may not give a fair presentation of the
group’s financial position and performance. The unaudited pro
forma financial effects have been compiled from the unaudited
condensed consolidated results of the Company for the six months
ended 30 June 2012 and are presented in a manner consistent with
the format and accounting policies adopted by the Company and
have been adjusted as described in the notes set out below:
Unaudited Pro forma
Before the After the
%
Notes transaction transaction Change
Basic and diluted basic 1&2
earnings per share
(cents)(“EPS” and
“DEPS”) 14.2c 16.3 12.8%
Headline and diluted 1&2 19.3 21.8 13.0%
headline earnings per
share (cents) (“HEPS”
and “DHEPS”)
Number of ordinary
shares in issue at
period end (‘000) (net
of treasury shares) 105 415 105 415 -
Weighted average number
of shares in issue at
period end (‘000) 105 415 105 415 -
Notes:
1. The "unaudited before the transaction" column information
has been extracted from the company’s unaudited condensed
consolidated results for the six months ended 30 June
2012.
2. The effects relating to the EPS, DEPS, HEPS and DEPS are
based on the following assumptions and information:
2.1 the transaction was effective 1 January 2012 at the
price determined in terms of the auction as detailed
in paragraphs 4 and 5 above (the “proceeds”). The
difference between the proceeds and the fair value on
the disposed units at 1 January 2012 has been
processed as a fair value adjustment. The fair value
of the units at 1 January 2012 was 720 cents per
unit. The result of this adjustment (net of taxation
and after non-controlling shareholders’ interest)is
an increase in profit attributable to equity holders
of Vunani Limited of R3.7 million;
2.2 The fair value adjustment to 30 June 2012 and related
deferred taxation on the disposed units has been
eliminated. The result of this adjustment (net of
taxation and after non-controlling shareholders’
interest)is a decrease in profit attributable to
equity holders of Vunani Limited of R1.9 million;
2.3 Distributions on the linked units of 27 cents per
unit together with the tax effect thereon have been
eliminated. The result of this adjustment (net of
taxation and after non-controlling shareholders’
interest)is a decrease in profit attributable to
equity holders of Vunani Limited of R0.4 million;
2.4 It has been assumed that the proceeds have been
utilised to reduce funding in Vunani Properties with
an average interest rate of 9.2% over the six month
period. The result of this adjustment (net of
taxation and after non-controlling shareholders’
interest)is an increase in profit attributable to
equity holders of Vunani Limited of R0.7 million
All adjustments will have a continuing effect.
Statement of financial position
In terms of the Listings Requirements, financial effects on
the statement of financial position are not presented as they
are not significant, being below 3%.
7. CLASSIFICATION OF THE TRANSACTION
Based on the value of the VPIF Disposal to date, the transaction
is classified as a Category 2 transaction in terms of the JSE
Limited Listings Requirements.
8. CAUTIONARY ANNOUNCEMENT
As the company will continue to dispose of further VPIF units as
detailed in paragraph 2 above, and such disposals may have a
material effect on the price at which Vunani shares trade,
shareholders are therefore advised to exercise caution when
dealing in Vunani shares until such time as a further
announcement is made.
12 October 2012
Sandton
Independent Designated Adviser
Grindrod Bank Limited
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