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RBA HOLDINGS LIMITED - Increase in and restatement of loan, issue of debentures, share options and cautionary announcement

Release Date: 26/06/2014 13:53
Code(s): RBA     PDF:  
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Increase in and restatement of loan, issue of debentures, share options and cautionary announcement

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RBA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/009701/06)
(JSE code: RBA ISIN: ZAE000104154)
(“RBA” or “the company”)


INCREASE IN AND RESTATEMENT OF LOAN, ISSUE OF DEBENTURES, SHARE
OPTIONS AND CAUTIONARY ANNOUNCEMENT


1.   Introduction

       1.1.    Shareholders are referred to the announcement released on 7 March 2014, that
               the company had decided to raise capital to improve its liquidity position, to support
               growth, further reduce short term debt, improve skills levels in the company and
               implement an ERP system.

       1.2.    R 16.2 million capital was to be raised by means of a loan, the issuing of 135 million
               debentures at 12 cents each and the granting of options to subscribe for 135 million
               shares at 12 cents each to RBA’s major shareholders Riskowitz Capital
               Management LLC (“Riskowitz”), Protea Asset Management LLC (“Protea”) and
               Midbrook Lane Proprietary Limited (“Midbrook Lane”), which currently hold a total
               of 123 587 159 (20,11%) of the 614 876 352 shares in issue as follows:

              -       Riskowitz:              56 787 354 shares (9.24%)
              -       Protea:                 32 623 104 shares (5.31%)
              -       Midbrook Lane:          34 176 701 shares (5.56%)

       1.3.    During the first six months of 2014 production activity has steadily increased in line
               with the company’s expectation of reaching above break-even levels of production
               in 2014 but the continued operation below break-even levels over this period and
               increased working capital requirements to fund this growth has necessitated a
               further capital injection.

       1.4.    Thus, in order to raise additional capital for the purposes indicated above in 1.1,
               an additional investor, Hillside International Holdings Limited (“Hillside”) has
               undertaken to provide an additional R 15 million by means of an additional loan,
               the subscription for 125 million additional debentures at 12 cents each and
               subscription for options to subscribe for an additional 125 million shares at 12 cents
               (“the Hillside Transaction”).

       1.5.    On 25 June 2014, in order to give effect to the additional capital raising, RBA and
               its subsidiaries Groundbase Professional Land Development Services (Pty)
               Limited (“Groundbase”) and RBA Developments (JHB) (Pty) Limited (‘RBA
               Developments”) entered into an amended and restated Loan, Debenture
               Subscription and Share Option Agreement (“the Restatement Agreement”) with
               the Riskowitz, Protea, Midbrook Lane and Hillside (together the “Subscribers”).

      1.6.   The Hillside Transaction will be partially secured by guarantees issued by
             Groundbase and RBA Developments. The Groundbase Guarantee will be
             supported by a second mortgage bond over a property owned by Groundbase in
             Polokwane and the RBA Developments Guarantee will be supported by
             irrevocable commitments to transfer the proceeds from the construction of certain
             identified houses to Hillside if so required.

2. Suspensive conditions

      The Agreement is subject to the fulfillment of the following remaining suspensive
      conditions:

      2.1.   that by no later than 30 June 2014, the company delivers to the Subscribers
             resolutions of the board of directors of the company approving the terms and
             conditions of the Restatement Agreement, and ratifying the authority of the person
             who signed the Restatement Agreement on behalf of the company;

      2.2.   that by no later than 30 June 2014, the company delivers to the Subscribers a copy
             of the resolution from the board of directors of the company approving the debt in
             terms of section 46 of the Companies Act 71 of 2008 (the "Companies Act") for the
             implementation of the Restatement Agreement;

      2.3.   that by no later than 30 June 2014 the company delivers to the Subscribers written
             unconditional and irrevocable undertakings from shareholders holding at least
             45% of the shares held by the company’s shareholders other than the Subscribers
             to vote in favour of the resolutions required to approve the transaction.


3. Conditions of utilisation imposed by Hillside

   RBA may not request a drawdown under the Hillside Loan unless Hillside has received the
   following:

      3.1.   copies of resolutions of the boards of directors and shareholders of Groundbase
             and RBA Developments authorising the granting of the Groundbase Guarantee
             and the RBA Developments Guarantee respectively;

      3.2.   originals of the executed Guarantees;

      3.3.   evidence that the Southern Gateway Mortgage Bond has been registered;

      3.4.   evidence that all approvals required from the South African Exchange Control
             Authorities have been obtained;

      3.5.   original irrevocable undertakings from attorneys in support of the RBA
             Developments Guarantee.
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4. Loan

      The salient terms and conditions of the loan are as follows:

      4.1.   The Subscribers shall lend and advance an amount of R31 200 000 (thirty one
             million two hundred thousand Rand) to the company on the following basis :

             Riskowitz – R7 984 700 (unsecured);

             Protea – R6 401 300 (unsecured);

             Midbrook Lane – R1 814 000 (unsecured);

             Hillside – R15 000 000 (secured).

      4.2.   The unsecured loans shall bear interest at 90% of prime from the date of advance
             to the repayment date as set out in 4.3 below. The secured Hillside Loan shall bear
             interest at prime. Accrued interest on the loans shall be paid in cash on the
             repayment date.

      4.3.   The loans shall be repayable by the company either by issuing 260 000 000
             Debentures to the Subscribers on the basis set out in 5 below, or in cash by not
             later than 30 September 2014 if the conditions precedent for the issue of the
             debentures are not timeously fulfilled, or on demand in the event of any event of
             default occurring.

5. Issue of debentures

      The salient terms and conditions of the redeemable debentures are as follows:

      5.1.   The issuing of the debentures to the Subscribers will be subject to the fulfilment of
             the following conditions:

             5.1.1. the company delivering to the Subscribers a copy of a resolution of the
                    shareholders in terms of paragraphs 5.51 and 5.53 of the JSE Listings
                    Requirements approving the issue of debentures, the granting of the option
                    and the issue of the option shares on exercise of the option, with a 75%
                    majority of the votes cast in favour of such resolution;

             5.1.2. approval by the JSE, to the extent required in terms of the JSE Listing
                    Requirements, of the listing of the option shares after they had been issued
                    as contemplated by the Restatement Agreement.

      5.2.   On the subscription date the Subscribers will subscribe in cash for 260 000 000
             debentures at 12 cents per debenture, for the aggregate price of R31 200 000
             (thirty one million two hundred thousand Rand). Hillside will subscribe for
             Guaranteed Debentures in the amount of R15 million which will be secured by the
             company, and in particular by the Groundbase Guarantee and the RBA
             Development Guarantee. The other debentures will be unsecured.
                                                                                                
      5.3.   The debentures (other than the Guaranteed Debentures) will bear interest at 90%
             of prime, payable three monthly in arrears. The Guaranteed Debentures will bear
             interest at prime.

      5.4.   The debentures shall be redeemed by the company by not later than the third
             anniversary of the subscription date.

      5.5.   The company will be entitled to call for the earlier redemption of all or some of the
             debentures on the terms and conditions set out in the Restatement Agreement.

      5.6.   A Subscriber shall be entitled at any time to require the redemption of a specified
             number of debentures against an exercise of the option in respect of an equal
             number of option shares.

6. Issue of share options

      The salient terms and conditions of the share options are as follows:

      6.1.   The Subscribers will have the right to subscribe for 260 000 000 ordinary shares
             in RBA at 12 cents per share on the terms and conditions set out in the
             Restatement Agreement.

      6.2.   The option will be exercisable by the Subscribers at any time before the
             redemption of the debentures.

      6.3.   Upon exercise of the option, the Subscribers shall pay to the company the option
             subscription price of 12 cents per option share. If 5.6 above applies, the obligation
             to pay shall be deemed to have been settled by the automatic set-off of the
             obligation against the company’s obligation to redeem an equivalent number of
             debentures held by the Subscribers.

      6.4.   The Subscribers shall not be entitled to dispose of, cede or transfer the share
             options except with the written consent of the company.


7. Additional terms

      7.1.   For as long as any of Riskowitz, Protea or Midbrook Lane hold debentures, they
             shall be entitled to nominate a director for appointment to the board of the
             company.

      7.2.   For as long as Hillside holds any debentures, Hillside shall be entitled to nominate
             a director for appointment to the board of the company.

      7.3.   The Subscribers undertake, as shareholders of the company, to vote in favour of
             any resolution proposed by the company at a meeting of its shareholders held
             before 30 September 2014 to increase its authorised share capital by a maximum
             of 500 000 000 (five hundred million) ordinary shares.

      7.4.   The company gave the Subscribers additional undertakings, warranties and
             representations which are customary in transactions of this nature.
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8. Approvals and undertakings to vote

      8.1.     Should all the share options be exercised, 260 000 000 ordinary shares would
               have to be issued.

      8.2.     The shares will be issued at a premium of 32% to the weighted average trading
               price of ordinary shares measured over thirty business days prior to 7 March 2014,
               namely 9.08 cents per share.

      8.3.     In terms of paragraphs 5.53(a)(i) and 5.51(g) of the JSE’s Listings Requirements,
               the granting of share options to the Subscribers, and the issue of shares in terms
               thereof, will be regarded as a specific issue of shares to a related party for cash.
               In the light of the premium at which it will take place, the issue will require the
               approval by way of an ordinary resolution (requiring at least a 75% majority of the
               votes cast in favour of such resolution) of all shareholders present or represented
               by proxy at the general meeting. The Subscribers may not vote, or if they voted,
               their votes may not be counted in respect of such ordinary resolution.

      8.4.     Riskowitz, Protea and Midbrook Lane are regarded as related parties for the
               purposes of Sec 123 of Companies Act. The number of share options issued to
               Riskowitz, Protea and Midbrook Lane will be such that, if they are all exercised,
               the aggregate shareholding of Riskowitz, Protea and Midbrook in RBA will be less
               than 35%. The proposed transaction will therefore not be an affected transaction
               as defined in the Companies Act as well as in Chapter 5 of the Companies
               Regulations dealing with Fundamental Transactions and Takeover Regulations.
               No offer to minorities of RBA will be required.

      8.5.     Similarly, the number of options issued to Hillside will be such that, if they are all
               exercised, the aggregate shareholding of Hillside in RBA will be less than 35%.

9. Pro forma financial effects

   The pro forma financial effects of the issue of the debentures and the share options are in the
   process of being calculated and will be published in due course.

10. Circular and general meeting

   A circular containing, inter alia, full details of the loan, debentures and share options will be
   posted to shareholders in due course. The circular will contain a notice of general meeting of
   shareholders to vote on the debentures and share options.

11. Cautionary announcement

   Shareholders are advised to exercise caution when dealing in the company’s securities until
   the financial effects of the issue of the debentures and the share options have been
   announced.

Johannesburg
26 June 2014

Designated and Corporate Adviser

Exchange Sponsors

Date: 26/06/2014 01:53:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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