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MTNZF announces exercise of the call option by MTN Group Limited
MTN Zakhele Futhi (RF) Limited
(Incorporated in the Republic of South Africa)
(Date of incorporation: 21 June 2016)
(Registration number: 2016/268837/06)
JSE share code: MTNZF
ISIN: ZAE000279402
LEI: 378900429C4F73B1BE74
(“MTNZF”)
Exercise of the call option by MTN Group Limited (“MTN”)
On 22 August 2016, MTN announced the details of its 2016 Black Economic Empowerment ("BEE") ownership
transaction (the "2016 MTN BEE Transaction"), in terms of which: (i) MTNZF issued ordinary shares to qualifying
members of the Black public; and (ii) MTNZF acquired MTN ordinary shares, at a discount, constituting
approximately 4% of the issued share capital of MTN.
The Broad Based Black Economic Empowerment (“BBBEE”) structure underlying the 2016 MTN BEE Transaction is
funded by a combination of vendor funding from MTN and third party preference share funding (via preference
shares issued by a special purpose vehicle ("BFC2"; "BFC2 Preference Shares") to third-party banks and financial
institutions and back-to-back preference shares issued by the BBBEE vehicle, being MTNZF, and which are
scheduled to mature in 2021. The third-party funding has to date been significantly paid down, with a balance
presently outstanding of approximately R1,2 billion (which is further expected to be reduced to approximately
R960 million when the dividend declared by MTN on 11 March 2020 is paid).
The Covid-19 virus has had unprecedented global impact, causing the prices of shares globally to decline
significantly. As with those listed on global stock exchanges, the prices of shares on the JSE, and the shares of MTN
and MTNZF, have been similarly adversely impacted.
As is customary, the third-party funding documents require the MTN share price to remain above certain set cover
levels and price thresholds ("share covenants"), which enable the funders to accelerate their repayment should
these share covenants be triggered. Due to the impacts of Covid-19, these thresholds have been triggered.
The MTNZF scheme is structured robustly and is supported by MTN in multiple ways. Over the eight-year life of
the scheme, the potential for unforeseen, but material and sudden, movements in market prices was provided
for, and a mechanism was included in the documents to enable MTN to voluntarily take over the third-party
funding in these circumstances, through the exercise of an option to purchase the preference shares.
Accordingly, in co-ordination with the third-party funders, and in continued support of the scheme, MTN (through
its nominee, MTN Holdings Limited ("MTN Holdings")) has today voluntarily entered into an agreement with the
funders to exercise its call option to acquire the third-party funding. Under the exercise of the call option, MTN
Holdings will acquire the preference shares on and with effect from immediately after MTNZF's next scheduled
priority of payments occurs, which is anticipated to be 15 April 2020. This will enable the scheduled MTN dividend
to be received and applied to repay a portion of the third-party funding (after making due provision for costs,
taxes, operating expense, etc., of MTNZF). The preference shares will be acquired by MTN for an amount equal to
the then-outstanding balance, plus any other amounts owing to the third-party funders under the funding
documents.
Provision has also been made for the third-party funders to remain in the structure in circumstances where the
MTN share price has recovered to the agreed price threshold at the time of (or shortly before) the implementation
of the purchase. This will be at the discretion of MTN and the third-party funders at the time.
The board of MTNZF wishes to thank MTN for their assistance provided to MTNZF in dealing with this set of
circumstances.
The board of MTNZF further wishes its shareholders to remain safe and healthy during this unprecedented Covid-
19 environment and to adhere to the directives announced by President Cyril Ramaphosa on 23 March 2020.
Johannesburg
26 March 2020
JSE Sponsor to MTN Zakhele Futhi
Tamela Holdings Proprietary Limited
Date: 26-03-2020 04:00:00
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