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ERB - Erbacon Investment Holdings Limited - Update on the debt restructure plan
Erbacon Investment Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2007/014490/06)
Share code: ERB
ISIN: ZAE000111571
("Erbacon" or "the Company")
UPDATE ON THE DEBT RESTRUCTURE PLAN
Shareholders are referred to the SENS announcements dated 27 March 2012, 16 May
2012 and 17 May 2012, wherein shareholders were advised that Erbacon had entered
into an agreement, in terms of which Erbacon`s debt owing to certain loan
providers ("Loan Providers") would be restructured through a recapitalisation
plan consisting of, inter alia, the conversion of the outstanding loans due to
the Loan Providers ("Conversion of the Loan Accounts") and the conversion of the
preference shares ("Conversion of the Preference Shares"), into ordinary shares
in Erbacon ("the Debt Restructure Plan").
The main purpose of the Debt Restructuring Plan is to recapitalise the balance
sheet of Erbacon in order to enable the Company to implement its growth plan. In
the event that the Debt Restructuring Plan is successfully implemented then the
Company will have a stronger balance sheet and will be better placed to take
advantage of opportunities that present themselves in the market.
The Conversion of the Loan Accounts will be implemented by way of a rights offer
("Rights Offer") and the Conversion of the Preference Shares will be implemented
by way of a specific approval to issue shares for cash to the preference
shareholder ("Specific Approval"). In addition and further to certain members of
management having advanced loan funding to the Company and participating in the
Conversion of the Loan Accounts, by way of the Rights Offer, and as part of the
Debt Restructuring Plan, the Company wishes to undertake a specific issue of
shares to management ("Management Specific Issue of Shares").
In order to implement the Debt Restructuring Plan, it will be necessary for
Shareholders to approve an amendment of the Company`s preference share terms,
the adoption of a new Memorandum of Incorporation (incorporating the amended
preference share terms), the conversion of the Company`s share capital from par
value to no par value shares, an increase in the Company`s authorised share
capital, the Conversion of the Preference Shares, the authority to issue shares
in terms of section 41(3)of the Companies Act, the waiver of a mandatory offer
and the Management Specific Issue of Shares.
All corporate actions forming part of the Debt Restructuring Plan are inter-
conditional and therefore should any one resolution relating to the corporate
actions not be approved by Shareholders, then none will be implemented.
In addition to the Debt Restructuring Plan, the Company wishes to obtain a
general authority from its shareholders in terms of section 45(3) of the
Companies Act, to authorise the Company to provide direct or indirect financial
assistance to any company or corporation which is related or inter-related to
the Company.
CONVERSION OF THE PREFERENCE SHARES
In terms of the Debt Restructuring Plan, the preference shares will be converted
to ordinary shares in the ratio of 4.2 ordinary shares for each 1 Preference
Share held by the preference shareholder on the conversion date.
The Conversion of the Preference Shares will have the effect that the 67 410 000
preference shares held by the preference shareholder will be converted to 283
122 000 ordinary shares, at an implied share price of R0.40 per ordinary share.
WAIVER OF THE MANDATORY OFFER
Following the Conversion of the preference shares, the preference shareholder`s
total shareholding in Erbacon will be in excess of 35% of the total issued Share
capital of the Company, thereby triggering a Mandatory Offer in terms of section
123 of the Companies Act, unless same is waived. Accordingly shareholders will
be requested to waive the mandatory offer by way of an ordinary resolution
approved by the independent holders of more than 50% of the general voting
rights of all the issued securities of the Company.
The preference shareholder will be restricted from voting on the aforementioned
ordinary resolution, as it is regarded as non-independent.
CONVERSION OF THE LOAN ACCOUNTS (BY WAY OF THE RIGHTS OFFER)
The Conversion of the Loan Accounts is to be implemented by way of the Rights
Offer, in terms whereof, inter alia, the Loan Providers will set off the total
outstanding loan amount, together with all accrued interest thereon, against the
subscription price payable by the Loan Providers in terms of the Rights Offer.
All shareholders of the Company will be entitled to participate in the Rights
Offer on the same basis as the Loan Providers. To the extent that any of the
Loan Providers are not shareholders and therefore are not entitled to receive
rights in terms of the Rights Offer, the remaining Loan Providers will renounce
excess Rights Offer rights to such Loan Providers in order to allow such Loan
Providers to convert their portion of the loan accounts into ordinary shares.
In terms of the Rights Offer it is anticipated that 390 240 594 new Ordinary
Shares of no par value will be offered to Shareholders, at a subscription price
of R0.40 per Rights Offer share, in the ratio of 2 Rights Offer shares for every
1 ordinary share held on the record date of the Rights Offer.
Shareholders should note that the total outstanding loan amount will accrue
interest until the Rights Offer implementation date and therefore in the event
that the Rights Offer implementation date is delayed, then the total outstanding
loan amount will change in order to account for additional accrued interest. The
total outstanding loan amount accrues interest at a rate of 14% (prime plus 5%)
per annum.
The final determination of the Rights Offer implementation date is dependent on
the date of registration of the Special Resolutions required to implement the
Debt Restructuring Plan by the Companies and Intellectual Property Commission.
Therefore the final terms of the Rights Offer, including the total outstanding
loan amount, will be announced when the aforementioned resolutions are
registered in order to take into account interest that will accrue on the loan
accounts until the Rights Offer implementation date.
POSTING OF CIRCULAR AND NOTICE OF GENERAL MEETING
Shareholders are hereby advised that a circular containing all relevant
information on the Debt Restructuring Plan and the corporate actions referred to
above ("the Circular"), including a notice of a general meeting, has been
distributed to shareholders today, 1 June 2012.
Shareholders are hereby advised that a general meeting of shareholders will be
held at the Company`s registered address being Block 3 Unit 6, The Willows
Office Park, 276 George Road, Erand Gardens, Midrand, Gauteng, South Africa
1685, at 10:00 on Friday, 29 June 2012, to consider and, if deemed fit, approve
the requisite resolutions to effect the Debt Restructuring Plan and the
corporate actions referred to above.
PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects of the Debt Restructuring Plan, as set
out in the table below, are the responsibility of the Directors and have been
prepared for illustrative purposes to reflect how the Debt Restructuring Plan
may have affected Erbacon`s results for the year ended 29 February 2012, based
on the assumptions that:
Erbacon`s results for the year ended 29 February 2012 were adjusted to take into
account the effect of the additional loans that were advanced by certain of the
Loan Providers post year end to meet funding requirements;
for the purpose of calculating earnings per share and headline earnings per
share, the Debt Restructuring Plan was effected on 1 March 2011; and
for the purpose of calculating net asset value and net tangible asset value per
share, the Debt Restructuring Plan was effected on 29 February 2012.
Taking the above factors into consideration and because of their nature, the
unaudited pro forma financial effects may not fairly reflect Erbacon`s financial
performance and position post the implementation of the Debt Restructuring Plan.
The detailed unaudited pro forma financial effects of the Debt Restructuring
Plan, including detailed notes thereto, are set out in Annexure 1 to the
Circular.
The unaudited pro forma financial effects of the Debt Restructuring should be
read in conjunction with the Reporting Accountants` Report thereon as set out in
Annexure 2 to the Circular.
Before Pro forma Pro forma Change
restated after Debt
(incorpor Restructur
ating ing Plan
Managemen
t and
Sharehold
er loans)
Basic and diluted (92.35) (92.92) (26.66) 71%
earnings per share
(cents)
Headline and diluted (70.81) (71.39) (21.29) 70%
headline earnings per
share (cents)
Net asset value per 49.08 49.08 37.49 (24%)
share (cents)
Net tangible asset value (17.69) (17.69) 20.86 n/m
per share (cents)
Weighted number of 193.8 193.8 777.9 301.3%
shares in issue
(millions)
Number of shares in 193.8 193.8 777.9 301.3%
issue (millions)
SALIENT DATES AND TIMES
The salient dates and times relating to the Debt Restructuring Plan are as set
out in the table below. The definitions and interpretations set out on pages 7
to 11 of the Circular apply to this section.
2012
Salient dates and times
Record date in order to be eligible to Friday, 25
receive the Circular containing the May
Notice of General Meeting
Circular and Notice of General Meeting Friday, 1
posted to Shareholders June
Last date to trade in order to be Friday, 15
eligible to vote at the General Meeting June
Record date in order to be eligible to Friday, 22
vote at the General Meeting June
Last day to lodge forms of proxy for Thursday, 28
the General Meeting (by 10:00)3 June
General Meeting (at 10:00) Friday, 29
June
Results of General Meeting released on Friday, 29
SENS June
Submission of Special Resolutions to Monday, 2
CIPC July
Anticipated date for registration of Wednesday, 8
the Special Resolutions by the CIPC August
Anticipated declaration date for the Friday, 10
Conversion of the Preference Shares and August
the Rights Offer
Anticipated finalisation date for the Friday, 17
Conversion of the Preference Shares and August
the Rights Offer
Anticipated record date for the Friday, 31
Conversion of the Preference Shares and August
the Rights Offer
Anticipated Conversion Date and Rights Monday, 3
Offer Implementation Date September
Notes:
All times indicated above and below are local times in South Africa.
The dates and times indicated in the table above are subject to change. Any such
changes will be released on SENS and published in the press.
To be valid, the completed forms of proxy must be lodged with the Transfer
Secretaries, Computershare Investor Services (Pty) Limited, Ground Floor, 70
Marshall Street, Johannesburg, 2001 or posted to the Transfer Secretaries at P O
Box 61051, Marshalltown, Johannesburg, 2107, to reach them by no later than at
10:00 on Thursday, 28 June 2012, alternatively, such proxy forms may be handed
to the Company Secretary or Chairman of the General Meeting at any time prior to
the commencement of the General Meeting.
Anticipated dates are dependent on the date of registration of the Special
Resolutions at the CIPC.
WITHDRAWAL OF CAUTIONARY
Following the publication of this announcement and the pro forma financial
effects of the Debt Restructuring Plan, shareholders are no longer required to
exercise caution when dealing in Erbacon securities.
1 June 2012
Midrand
Designated and Corporate adviser
PSG Capital (Pty) Limited
Date: 01/06/2012 15:47:01 Supplied by www.sharenet.co.za
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