Sale of the Corporate Debtors Book to Land Bank

AFGRI Limited                                                                   
(Incorporated in the Republic of South Africa)                                  
Registration Number: 1995/004030/06                                             
ISIN: ZAE000040549                                                              
JSE share code: AFR                                                             
("AFGRI" or "the Company") 

                                                     

THE DISPOSAL BY GROCAPITAL FINANCIAL SERVICES PROPRIETARY LIMITED (GROCAP) OF ITS CORPORATE DEBTOR BOOK TO THE LAND AND AGRICULTURAL DEVELOPMENT BANK OF SOUTH AFRICA (LAND BANK) AND WITHDRAWAL OF CAUTIONARY


Shareholders are referred to the SENS announcement dated 16 April 2012 wherein it was announced that  AFGRI Operations Limited, a wholly-owned subsidiary of the Company (AFGRI Operations), and GROCAP (a wholly-owned subsidiary of AFGRI Operations) had entered into a binding Sale Agreement ("the Agreement") with the Land Bank in terms of which GROCAP will dispose of its existing and future corporate debtor book to the Land Bank ("the Transaction) and to the renewal of the cautionary announcement dated 30 May 2012.
1. THE TRANSACTION
1.1 Rationale 

1.1.1. The Transaction will reduce credit risk on AFGRIs balance sheet and allow AFGRI to pursue more profitable opportunities with the capital that is released from the sale of the corporate debtor book;
1.1.2. AFGRI and GROCAP have strong and established relationships with corporate clients in the agricultural sector ,which relationships   AFGRI and GROCAP want to retain and grow, and wish to continue offering financial services, at the current standard of service, to new and existing corporate clients alongside their other products and service offerings; and 
1.1.3. GROCAP has the capacity and infrastructure to act as an agent of the Land Bank in respect of the administration functions relating to the corporate debtor book. 

1.2 Terms of the Transaction
In terms of the Transaction:

1.2.1 GROCAP will sell its existing corporate debtor book to the Land Bank;
1.2.2 GROCAP will continue to originate corporate debt in its own name and sell such corporate debt to the Land Bank from time to time  a; and
1.2.3 GROCAP will manage, administer and service the corporate debtor book on behalf of the Land Bank.

1.3 Purchase price 

1.3.1 The purchase price of the corporate lending book is the face value of the corporate debtor book as at the effective date, being the agreed date of acquisition specified in the definitive agreements, net of audited impairments as calculated in accordance with IAS 39. 
1.3.2 The face value of the corporate debtor book fluctuates according to the utilisation of the corporate book facilities. The total aggregate amount of the available corporate book facilities is approximately R 1,716,677,000. As at 29 June 2012 the utilised portion of the corporate debtor book facilities is approximately R 1,122,836,595. The corporate debtor book will be sold in various tranches. The purchase price of the first tranche of the corporate debtor book is approximately R 1,122,836,595.
1.3.3.	The purchase price will be utilised by GROCAP to settle the         existing debt facilities in respect of the corporate debtor book. 

1.4 Pro forma financial effects of the Transaction

For purposes of calculating the pro forma financial effects of the Transaction, the pro forma Balance Sheet impact of the Transaction is based on the assumption that the Transaction was effective on 31 December 2011, while the pro forma Income Statement impact is based on the assumption that the Transaction was effective on 1 July 2011.


These unaudited pro forma financial effects, which are the responsibility of the Directors, have been prepared for illustrative purposes only and because of their nature may not fairly present AFGRI's financial position. 

                         

The pro forma financial effects of the Transaction on AFGRI`s earnings per share, headline earnings per share, net asset value per share and net tangible asset value per share for the interim financial year ended 31 December 2011 are not significant (i.e. are less than 3%), and have therefore not been disclosed.


The Debt to Equity ratio improves from 1.85 to 1.73.
       
2. SUSPENSIVE CONDITIONS  

All the Suspensive Conditions to the Transaction have been fulfilled. 
3. Withdrawal of Cautionary

The Cautionary dated 16 April 2012 is hereby withdrawn. Accordingly shareholders no longer need to exercise caution when trading in AFGRI shares.


3 July 2012

Attorneys for the Company, AFGRI Operations and GROCAP
Van der Merwe Attorneys
Sponsor of the Company

Investec Bank Limited





Date: 03/07/2012 05:47:00 Supplied by www.sharenet.co.za                     
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