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SAN - Sanyati Holdings Limited - Business rescue application and renewal of

Release Date: 04/06/2012 17:19
Code(s): SAN
Wrap Text

SAN - Sanyati Holdings Limited - Business rescue application and renewal of cautionary announcement Sanyati Holdings Limited Incorporated in the Republic of South Africa Registration number: 1988/002538/06 Share code: SAN ISIN code: ZAE000081055 ("Sanyati" or "the Company") Business rescue application and renewal of cautionary announcement 1. Introduction The board of directors ("Board") of Sanyati would like to draw shareholders attention to the announcements that were published on SENS on 10 May and 23 May 2012, respectively, in which the shareholders were advised that the Company`s liquidity has been impacted by long outstanding and significant payments owing from certain government clients and that it is currently in negotiations aimed at securing the necessary short-term and long-term funding requirements in order to overcome these difficulties. 2. Update on the situation The discussions and negotiations to date regarding potential funding solutions have included Sanyati`s bankers, major shareholders, asset- based finance providers, potential private investors and development finance institutions. The most material amount owing is R43 million in respect of the Free State Provincial Government regarding the rehabilitation of 15kms of road between Harrismith and Oliviershoek. This project was awarded to Sanyati in April 2010 with the bulk of project costs incurred by October 2010. Despite the many assurances over many months by officials within the Free State Government that this amount would be paid, the amount remains outstanding at today`s date. The situation has been exacerbated by the obligation of Sanyati to incur significant monthly traffic accommodation costs on this incomplete road project in order to protect its contractual rights with regards to the amount outstanding. Sanyati, together with a number of other similarly affected contractors, was finally invited to meet with officials from the Free State Government on 31 May 2012 in an attempt to negotiate and resolve this matter. The meeting was inconclusive and did not provide any clear indication as to when and how this matter will be resolved. Other long outstanding payments owing include three separate local government matters in KwaZulu-Natal (aggregate value in excess of R30 million) and the residue of the amount owing since December 2011 in respect of the Limpopo Government (R6 million). The aggregate of the amounts, mentioned above, constitutes 25% of the debtors` book as at 29 February 2012 and as a result of the age of these debtors, no longer qualifies for short term financing in terms of the overdraft facility agreement in place. Notwithstanding the above, Sanyati has, over the last twelve to eighteen months continued to focus on building an order book and platform of opportunities in strategically identified markets that exclude traditional unattractive markets such as domestic roads. The order book at 29 February 2012 (for execution in the year ending February 2013) was in excess of R1.2 billion. Significant market segments included R327 million in mining infrastructure, R230 million in the energy sector, R309 million in water projects, R117 million in rail infrastructure and R163 million in the telecoms market. The severity of the liquidity problem however continues to negatively impact on Sanyati`s ability to execute this order book. Insufficient working capital has brought about low activity levels on the Company`s various site operations with inevitable deteriorating margins and inability to achieve project milestones. We have therefore recently commenced discussions with potential joint venture partners in our efforts to retain and execute the existing order book. Joint venture partners will be expected to provide the necessary working capital in return for an agreed share of the underlying margin achieved on execution of the project. The overall objective is to find optimal solutions to meet the needs of Sanyati`s stakeholders (i.e staff, creditors and subcontractors and shareholders). 3 Resolutions to begin business rescue proceedings The Board of Sanyati is of the view that both the Company and its wholly-owned subsidiary, Sanyati Civil Engineering and Construction Proprietary Limited ("SCE&C"), are currently financially distressed, as contemplated in Chapter 6 of the Companies Act, 71 of 2008 ("the Companies Act"), as amended. The Board is further of the view that there appears to be a reasonable prospect of rescuing both the Company and SCE&C from their current difficulties and is in the process of preparing a comprehensive business rescue plan ("Business Rescue Plan") in conjunction with professional advisors. The executive directors are in negotiations in an effort to secure external funding and bring about the success of the above mentioned Business Rescue Plan. Based on this, the Board resolved on Tuesday, 29 May 2012, that both the Company and SCE&C begin business rescue proceedings and be placed under supervision in terms of Section 129 of the Companies Act ("Resolutions"). The Board believes that the implementation of business rescue proceedings will afford the executive directors the opportunity to develop and implement the Business Rescue Plan in a manner that will optimise the likelihood of the Company and SCE&E continuing in existence as going concerns. 4. Filing of the Resolutions The Resolutions were filed with the Companies and Intellectual Property Commission on Wednesday, 30 May 2012 and the effective date of commencement of the business rescue proceedings is confirmed as Wednesday, 30 May 2012, in accordance with Section 132 (1)(a)(i) of the Companies Act. 5. Appointment of a business rescue practitioner Both Sanyati and SCE&C have appointed Mr Trevor Murgatroyd as their business rescue practitioner on Tuesday, 29 May 2012 and he duly accepted the appointment on Tuesday, 29 May 2012. 6. Notice of the Resolutions The Company and SCE&C are in the process of giving notice of the Resolutions and their effective dates, in the prescribed manner to every affected person ("Notice"). Such Notice includes copies of the Resolutions, sworn statements of the facts relevant to the grounds on which the Resolutions were founded in terms of Section 129(3)(a) of the Companies Act and the notice of appointment of a business rescue practitioner. Copies of the Notice may be obtained from the Company on e-mail admin@sanyati.co.za or on the website: www.sanyati.co.za 7. Renewal of cautionary announcement Sanyati requested that the shares be voluntary suspended on the JSE effective 23 May 2012 and the Board has requested that the suspension remains in place. Further, as a result of the auditors not being able to complete the audit for the year ended 29 February 2012 based on recent developments, it is possible that the results, that had to be released by no later than 31 May 2012, will not be finalised before 30 June 2012. Sanyati is in communication with the JSE and shareholders will be updated every six weeks, or earlier if required, on any developments pertaining to the future of the Company. Shareholders are advised to continue to exercise caution when dealing in the Company`s securities until further information with regards to the above is provided. Bryanston 4 June 2012 Sponsor KPMG Services Proprietary Limited Date: 04/06/2012 17:19:00 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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