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MEDICLINIC INTERNATIONAL LIMITED - COMPREHENSIVE REFINANCING OF THE GROUPS SWISS AND SA DEBT, NOTICE OF GENERAL MEETING AND CAUTIONARY ANNOUNCEMENT

Release Date: 01/08/2012 07:30
Code(s): MDC     PDF:  
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COMPREHENSIVE REFINANCING OF THE GROUP’S SWISS AND SA DEBT, NOTICE OF GENERAL MEETING AND CAUTIONARY ANNOUNCEMENT

Mediclinic International Limited
(Incorporated in the Republic of South Africa)
Registration number 1983/010725/06
ISIN: ZAE000074142 Share code: MDC
(“Mediclinic” or “the Group”)

COMPREHENSIVE REFINANCING OF THE GROUP’S SWISS AND SA DEBT, NOTICE OF
GENERAL MEETING AND CAUTIONARY ANNOUNCEMENT

* Comprehensive elective refinancing of the Group’s Swiss and SA debt
(“refinancing”), comprising:
  - New long-term, committed debt facilities in Switzerland and South
Africa, which are fully underwritten/pre-placed resulting in significant
annual saving in financing costs
  - ZAR5.0bn fully underwritten rights offer (“rights offer”)
* Places the Group in a position of strength with long-term and low-cost
committed finance taking advantage of attractively priced capital markets
and reflecting the quality of the Group’s businesses
* Provides sufficient capital to take advantage of the attractive growth
and development opportunities presented across all of the Group’s
businesses
* Refinancing enhances fully diluted, normalised Group headline earnings
per share by c.14% on an unaudited pro forma basis for the year ended 31
March 2012

1. Refinancing package
The Group is taking advantage of strong capital markets in both South
Africa and Switzerland to strengthen its balance sheet by raising equity
of ZAR5.0bn and refinancing its existing debt facilities of c.ZAR28.0bn
(note 1,2) in these countries. The refinancing provides the Group with the
appropriate capital structure to pursue strategic growth and development
opportunities, while significantly reducing financing costs going forward.

In 2007, Mediclinic acquired a 100% interest in the Hirslanden Group
(“Hirslanden”), the leading private hospital provider in Switzerland. The
acquisition was partly financed through a debt facility of CHF2.45bn
raised without recourse to the Group’s South African operations (“existing
Swiss facility”). At the same time, Hirslanden entered into a fixed-for-
floating Swiss interest rate swap with a notional value of CHF2.45bn
(“existing swap”).

As previously reported, this existing swap is significantly ’out-of-the-
money’ due to the reduction in Swiss interest rates across all maturities.
Currently, the estimated mark-to-market liability is c.CHF0.4bn. The total
debt and debt-like obligations in Hirslanden are currently estimated to be
c.CHF2.9bn (c.ZAR24.4bn(note 2)) (“existing Hirslanden debt”).

In addition, the Group has existing borrowings of c.ZAR3.6bn in South
Africa (“existing South African debt”).

While the existing Swiss facility only matures in October 2014, the board
of directors of Mediclinic (“board”) elected to raise equity and refinance
the Group’s Swiss and SA debt at this opportune time, recognising the
significant benefits to Mediclinic, namely:
* To take advantage of the favourable equity market in South Africa
through a fully underwritten rights offer;
* To take advantage of current favourable debt market conditions in both
Switzerland and South Africa to secure attractive terms in both
jurisdictions;
* To benefit from the current record low Swiss interest rates to fix the
cost of the new Swiss facilities at attractive rates for their entire
duration; and
* To provide flexibility to pursue strategic growth and development
opportunities.

The existing Hirslanden debt is proposed to be refinanced through a
combination of new debt facilities raised in Switzerland and Luxembourg
(“new Swiss debt funding”) (as outlined in section 2 below), existing cash
resources already held offshore and an injection into Switzerland of
capital from the total c.ZAR11.2bn proposed fundraising (debt and equity)
in South Africa.

The remaining proceeds from the South African fundraising will be used to
refinance the existing South African debt and provide the Group with
flexibility to pursue strategic growth and development opportunities.

The refinancing is conditional, inter alia, on the approval from
Mediclinic shareholders at a general meeting. Shareholders holding a
majority of Mediclinic shares have committed to vote in favour of the
proposed resolutions (see section 7 and 8 below).

Note 1 c.ZAR3.6bn in South Africa and c.CHF2.9bn in Switzerland (including
swap mark-to-market liability)
Note 2 Assumes ZAR8.50/CHF)

2. New Swiss debt funding
The new Swiss debt funding will comprise c.CHF2.1bn committed property-
backed facilities raised in Switzerland and Luxembourg without recourse to
the Group’s South African operations:
* CHF1.5bn first lien facility (“Swiss first lien”) with an amortising
repayment profile over 5 years and priced at Swiss LIBOR plus a margin of
2.0%;
* A revolving credit facility of CHF50m with a bullet maturity in 5 years
priced at Swiss LIBOR plus a margin of 2.0%;
* CHF0.3bn second lien facility (“Swiss second lien”) with a bullet
maturity in June 2018, priced at Swiss LIBOR plus a margin of 3.5%; and
* A new third lien facility (“Swiss third lien”) with a bullet maturity in
June 2018, priced at Swiss LIBOR plus a margin of 2.0%. The quantum of
this Swiss third lien will represent the actual mark-to-market liability
at refinance date on CHF1.4bn out of the total CHF2.4bn notional existing
swap (currently estimated to be c.CHF0.25bn).

The existing swap will be amended as follows:
* CHF1.8bn of the total existing CHF2.4bn notional will be restructured
into an extended at-the-money Swiss interest rate swap with a maturity and
amortisation profile matching the new Swiss first lien and Swiss second
lien facilities. The pricing of this amended swap will be set at
completion, at prevailing market rates, thereby fixing the majority of the
new Swiss debt funding at attractive rates for the entire period. The
balance of the CHF0.6bn notional existing swap will be unwound; and
* The actual mark-to-market liability on the existing swap at closing will
be settled through a combination of cash for c.CHF1.0bn of the notional
amount (currently estimated to represent a payment of c.CHF0.2bn) and the
new Swiss third lien for the remaining c.CHF1.4bn notional amount
(currently estimated to be c.CHF0.25bn).

The total blended cost of the new Swiss debt funding is therefore expected
to be c.2.5%. This compares favourably to the current cost of the Group’s
Swiss debt of c.5.6%. The pro forma like-for-like saving in third-party
financing cost is therefore expected to be in excess of CHF65m (ZAR550m)
per annum.

The mandated lead arrangers for the new Swiss debt funding are Barclays
Bank plc, Credit Suisse AG, UBS AG and Zürcher Kantonalbank (“Swiss MLAs”)
with Credit Suisse AG in the role of co-ordinator. Full facility
agreements have been entered into with the Swiss MLAs. All the new Swiss
debt funding has been either underwritten or pre-placed, the conditions of
which are provided in section 5 below.

3. New South African debt funding
The new South African debt funding will comprise 5 year committed senior
term debt facilities of ZAR4.2bn and a 5 year preference share facility of
ZAR2.0bn, all priced at market competitive rates.

The new ZAR4.2bn South African senior term debt facilities will comprise:
* ZAR2.95bn senior term loan with a bullet repayment;
* ZAR0.75bn senior amortising loan; and
* ZAR0.5bn capital expenditure facility with a bullet repayment.

The ZAR2.0bn preference share facility and the South African senior term
debt facilities will all rank pari passu and be secured through guarantees
of certain material South African Group companies and security over the
majority of the assets of the Group’s South African operations.

The new South African senior term funding has a favourable average
floating rate cost of funding of c.7.6%. Inclusive of the existing fixed
rate interest rate hedges which mature in 2-3 years, which will be kept in
place, the effective interest rate of c.10.0% compares favourably to the
current cost of the Group’s South African debt of c.10.3%. In addition,
the ZAR2bn preference share facility has been raised at a favourable rate
of 72% of prime (nacm).

The mandated lead arrangers and bookrunners for the new South African debt
and preference share facilities are Rand Merchant Bank, a division of
FirstRand Bank Limited (“RMB”), The Standard Bank of South Africa Limited
and ABSA Capital, a division of Absa Bank Limited (“South African MLAs”).

A facility agreement (“SA facility agreement”) has been entered into with
the South African MLAs. All the new South African term debt and preference
share facilities have either been underwritten or pre-placed, the
conditions to the utilisation of which are provided in section 5 below.
4. Rights Offer Circular
It is proposed that a total of ZAR5.0bn of new equity is raised through
the rights offer.

The rights offer will consist of an offer of 174,641,984 new Mediclinic
shares at an issue price of ZAR28.63 per Mediclinic share (“offer price”)
in the ratio of 26.77263 new Mediclinic shares for every 100 Mediclinic
shares held on the record date of the rights offer. The offer price
represents a c.25% discount to the 30-day volume weighted average price of
ZAR38.17 per Mediclinic share as at 31 July 2012.

The rights offer is fully underwritten by Remgro Limited, through its
wholly-owned subsidiary Industrial Partnership Investments Proprietary
Limited (“Remgro”). Remgro has entered into a binding agreement with
Mediclinic governing the terms and conditions of the underwriting of the
rights offer (“underwriting agreement”).

Further details of the rights offer, including the salient dates and times
as well as the unaudited pro forma financial effects will be announced in
due course. A circular containing full details of the rights offer
(“rights offer circular”) will be sent to Mediclinic shareholders in due
course.

5. Conditions precedent
Closing of the new Swiss debt funding is subject to the fulfilment of
inter alia the following conditions precedent:
* No material adverse change occurring before drawdown of the new Swiss
debt facilities;
* Execution of all security documentation and registration of security;
* Evidence of the restructuring of the existing swap;
* Evidence of the discharge of any security and guarantees under the
existing Swiss facility; and
* Injection into Hirslanden of the required additional funding from
existing cash resources and proceeds of the SA debt and equity raising.

Closing of the new SA term debt and preference share funding is subject to
the fulfilment of inter alia the following conditions precedent:
* The obtaining of all necessary regulatory and shareholder approvals;
* Execution of all required security documentation;
* The implementation of the rights offer;
* No default under the SA facility agreement being outstanding as at the
proposed date of the drawdown of the SA term debt and preference share
facilities; and
* No material adverse change in the South African or international banking
or capital markets during the period from the date of signing of the SA
facility agreement to the date of drawdown under the SA term debt and
preference share facilities.

6. Unaudited pro forma financial effects of the refinancing and rights
offer
The unaudited pro forma financial effects of the refinancing and rights
offer have been prepared for illustrative purposes only and due to the
nature thereof, may not fairly present Mediclinic’s financial position,
changes in equity, results of operations or cash flows after completion of
the refinancing and rights offer. The unaudited pro forma financial
effects are the responsibility of the Mediclinic directors and are based
on the published results for the financial year ended 31 March 2012.

The purpose of the unaudited pro forma financial effects is to illustrate
the effects of the refinancing and rights offer had it been implemented on
the dates and on the assumptions set out below. It does not purport to be
indicative of what the financial results would have been had the
refinancing and rights offer been implemented on a different date:

                          Audited                 Unaudited
                           12         Adjustments pro forma
                           months     for         after the
                           ended 31   refinancing refinancing %
                           March      and rights  and rights increase/
                           2012       offer       offer       (decrease)
Earnings/(loss) per
share (cents)             194.7       (226.8)     (32.1)      (116%)
Diluted earnings/(loss)
per share (cents)         187.3       (218.6)     (31.2)      (117%)
Headline earnings/(loss)
per share (cents)        194.9        (226.9)     (31.9)      (116%)
Diluted headline
earnings/(loss) per
share (cents)             187.5       (218.6)     (31.1)      (117%)
Normalised headline
earnings per share
(cents)                   193.0       25.3        218.3       13%
Normalised diluted
headline earnings per
share (cents)             185.7       26.1        211.8       14%
Number of ordinary
shares in issue (’000)    652,315     174,642     826,957     27%
Weighted average number
of ordinary shares in
issue (’000)              627,280     174,642     801,922     28%
Weighted average diluted
number of ordinary
shares in issue (’000)   651,779      174,642     826,421     27%

Note:
1. The audited financial information has been extracted without adjustment
   from the audited financial statements of Mediclinic for the year ended
   31 March 2012
2. The pro forma adjustments to the income statement have been calculated
   on the assumption that the refinancing and rights offer took place on 1
   April 2011
3. A rights offer price of ZAR28.63 per Mediclinic share has been used for
   the pro forma adjustments with 174,641,984 new Mediclinic shares being
   issued for gross proceeds of ZAR5.0bn
4. The net proceeds of the new Swiss and SA debt funding and rights offer
   are assumed to have been used to repay the existing South African debt,
   the existing Hirslanden debt and settle the existing swap
5. An average exchange rate of ZAR8.45/CHF has been used for the pro forma
   adjustments to the income statement, except for the once-off adjustments
   relating to the settlement of the existing swap and amortisation of
   capitalised financing expenses which are assumed to have taken place on
   1 April 2011 at an exchange rate of ZAR7.42/CHF
6. Normalised headline earnings per share excludes the effects of once-off
   pro forma adjustments including the realisation of a c.ZAR1.8bn loss
   (net of deferred tax) related to settlement of the existing swap, the
   payment of a c.ZAR56m breakage fee in relation to the existing SA debt
   facilities and the amortisation of c.ZAR184m of capitalised financing
   fees

7. Notice of general meeting and posting of circular
Notice is hereby given that a general meeting of Mediclinic shareholders
(“general meeting”) will be convened at Neethlingshof Estate, Polkadraai
Road, Vlottenburg, Stellenbosch at 10:00 on Thursday, 30 August 2012 to
consider and, if deemed fit, to approve the resolutions required to
implement the rights offer and the provision of financial assistance by
Mediclinic in connection with the subscription for the preference shares.

A circular providing information on the refinancing and the necessary
resolutions to be passed at the general meeting and incorporating a notice
convening a general meeting of Mediclinic shareholders, has been posted to
Mediclinic shareholders today, 1 August 2012.

8. Shareholder support
Shareholders holding a majority of Mediclinic shares have signed
commitments to vote in favour of the proposed resolutions. Details are set
out in the table below:

                                                            % of issued
Shareholder                                 Shares held     shares
Remgro                                      283,080,915     43.40%
Mpilo Investment Holdings 2 (Proprietary)
Limited (RF)                                39,332,736      6.03%
International Hospitals Network (GP) Limited 39,231,535     6.01%
Dr Edwin Hertzog (and family members and
trusts)                                     4,875,774       0.75%
Total                                       366,520,960     56.19%


9. Salient dates and times in relation to the general meeting
                                                                       2012
Last day to trade in Mediclinic shares on the JSE in
order to be recorded in the share register on the
record date to participate in and vote at the general
meeting on                                                Friday, 17 August
Record date to participate in and vote at the general
meeting on                                                  Friday, 24 August
Last day to lodge forms of proxy for the general
meeting by 10:00 on                                      Tuesday, 28 August
General meeting to be held at 10:00 on                  Thursday, 30 August
Results of the general meeting released on SENS on      Thursday, 30 August
Results of the general meeting published in the South
African press on                                            Friday, 31 August


10. Cautionary
Mediclinic shareholders are advised that a further announcement will be
published on SENS and in the South African press once the salient dates
and the unaudited pro forma financial effects of the rights offer have
been finalised. Accordingly, Mediclinic shareholders are advised to
exercise caution when dealing in their Mediclinic shares until a further
announcement is made.

Information on Mediclinic:
Mediclinic International, founded in 1983, is an international private
hospital group with operations in South Africa, Namibia, Switzerland and
the United Arab Emirates, and has been listed on the JSE, the South African
securities exchange, since 1986. The Group’s head office is based in
Stellenbosch,   South   Africa.   Mediclinic   currently   has   a   market
capitalisation of approximately R26.1bn and 652.3m ordinary shares in
issue. Visit www.mediclinic.com for more information.

For media enquiries:
CapitalVoice:
Johannes van Niekerk
Tel: +27 82 921 9110

Stellenbosch
1 August 2012


Joint financial adviser and sponsor to Mediclinic
Rand Merchant Bank (a division of FirstRand Bank Limited)

Joint financial adviser to Mediclinic
Greenhill & Co. International LLP

South African legal adviser to Mediclinic
Cliffe Dekker Hofmeyr Inc.

International legal advisers to Mediclinic
Lenz & Staehelin
Latham & Watkins

Accounting & tax adviser to Mediclinic
PricewaterhouseCoopers
Communication adviser to Mediclinic
CapitalVoice


Rand Merchant Bank, a division of FirstRand Bank Limited (“RMB”), which is
authorised and regulated in South Africa by the Financial Services Board,
is acting exclusively for Mediclinic and no one else in connection with the
refinancing described in this announcement and will not be responsible to
anyone, other than Mediclinic, for providing the protections afforded to
clients of RMB, nor for providing advice in relation to the refinancing or
any other matter referred to herein.

Greenhill & Co. International LLP (“Greenhill”) which is authorised and
regulated in the United Kingdom by the Financial Services Authority, is
acting exclusively for Mediclinic and no-one else in connection with the
refinancing described in this announcement and will not be responsible to
anyone other than Mediclinic for providing the protections afforded to
clients of Greenhill, nor for providing advice in relation to the
refinancing or any other matter referred to herein.

This announcement sets out details pertaining to, inter alia, the rights
offer and the announcement is addressed only to persons to whom it may
lawfully be addressed. The making of the rights offer in jurisdictions
other than South Africa may be restricted by law and a failure to comply
with any of those restrictions may constitute a violation of the applicable
securities laws of any such jurisdiction. Persons who are in possession of
this announcement must inform themselves about and observe any such
restrictions.

This announcement does not constitute an invitation or an offer to acquire
shares in the Group in South Africa or in any other jurisdiction.

Date: 01/08/2012 07:30:00 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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