Sanyati Holdings Ltd - The termination of business rescue proceedings, commencement of liquidation of SCE&C and resignation of director

Release Date: 10/07/2012 12:30
Code(s): SAN
 
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Sanyati Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1988/002538/06
Share code: SAN
ISIN code: ZAE000081055
(a??Sanyatia?? or a??the Companya??)



Application for the termination of business rescue proceedings, commencement of the liquidation of SCE&C and resignation of director of Sanyati
1. Application for the termination of business rescue proceedings and the liquidation of Sanyati Civil Engineering and Construction Proprietary Limited (a??SCE&Ca??) Sanyati shareholders (a??Shareholdersa??) attention is drawn to the announcement on SENS on Friday, 22 June 2012, whereby Shareholders were advised that the first meetings (a??Meetingsa??) of creditors and employees and employee representatives of Sanyati and SCE&C, as required in terms of the business rescue proceedings detailed in Chapter 6 of the Companies Act, No. 71 of 2008, as amended (a??the Acta??), took place as scheduled on Wednesday, 20 June 2012.
At the Meetings, Mr Trevor Murgatroyd, the appointed business rescue practitioner to both the Group and SCE&C (collectively a??the Businessa??), had advised the attendees of the Meetings, inter alia, that he believed that it was clear that the current basis of operation of the Business was not sustainable without a substantial capital injection and that if the Business was left as it was it would continue on a spiral to its eventual demise. The only reasonable prospect of rescuing the Business was an overall restructuring, which would include a combination of rationalising expenses, ringfencing viable projects, disposal of parts of the Business, disposal of certain contracts, entering into of joint ventures in respect of certain contracts, cancellation of unviable contracts and raising of capital. The prospect of rescuing the Business was highly dependent on the successful raising of emergency funding to enable the Business to continue operating during the period of the business rescue proceedings.
In order to allow time to implement the conceptual plan it was imperative that critical operational expenses of SCE&C were paid to preserve what remained of the Business. The absolute minimum critical short-term cash flow requirements to ensure the survival of the Business until the consideration of a business rescue plan amounted to approximately R32 million. This did not take account of the requirements after that date.
SCE&C had experienced financial distress for some time prior to the commencement of the business rescue proceedings, leading to many of its ongoing projects coming to a standstill and experiencing delays. As a result of the delays experienced prior to the commencement of the business rescue proceedings and which continued during the business rescue proceedings, many of the contracts were terminated by the respective clients. The order book has, therefore, decreased at a rate and by amounts far in excess of what was anticipated at commencement of business rescue proceedings or when initial views as to the viability of the Business were provided.
SCE&C has continued to report trading losses for the first three months of the financial year. From the information presented to the business rescue practitioner it is evident that SCE&C is in fact insolvent in that its liabilities exceed its assets. The Business is no longer able to continue operating as it can no longer meet its critical payment commitments. Under the circumstances, SCE&C is factually and commercially insolvent and is clearly no longer able to trade without independent financial assistance and unable to pay its debts.
Mr Murgatroyd held a meeting with certain of the remaining directors of SCE&C and Sanyati on Wednesday, 4 July 2012 during which
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