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Report to shareholders by the business rescue practitioner
MASONITE (AFRICA) LIMITED
(“The Company”)
REGISTRATION NUMBER : 1942/015502/06
ISIN: ZAE000004289
SHARE CODE: MAS
(Under supervision)
REPORT TO SHAREHOLDERS BY THE BUSINESS RESCUE PRACTITIONER
1. Business Rescue Process
Masonite (Africa) Limited (“Masonite”) filed for voluntary business rescue on the 22nd of
December 2015, as the Company was financially distressed. Pierre de Villiers Berrangé was
appointed the Business Rescue Practitioner (“BRP”) on 23 December 2015.
Financially distressed as defined in the Companies Act No. 71 of 2008 (“the Act”), means inter
alia, that :
“(i) it appears to be reasonably unlikely that the company will be able to pay all of its debts
as they become due and payable within the immediately ensuing six months”
Statutory notifications have been given timeously to all affected parties.
Updates on the business rescue process and notifications are displayed on the Company’s
website : www.masonite.co.za, under the business rescue tab.
2. Post commencement finance
It was resolved that the Company would maximise value for its creditors and shareholders if
it continued trading whilst the BRP sought a buyer for the business.
Continued trading required the BRP to raise post commencement finance (“PCF”). PCF was
raised with Grindrod Bank, against the security of the forestry assets.
In line with the proposed Business Rescue Plan, creditors affected by the payment
moratorium, have been settled in full from the PCF funding.
The Company is not trading on credit and pays its suppliers in advance.
3. Trading post-business rescue
Masonite continues to operate in a challenging business environment, the first few months
of 2016 has been no exception.
3.1 Mill update
Masonite completed a planned Mill maintenance shut down through December and
production commenced successfully on 11th January. Delivered volumes into the
market, were in line with projections behind the prior year, as the South African
market remains tight. The Company continued to fight for market share against
cheaper substitutes in the primary export market. The Mill output is in line with last
six months of 2015 production levels. The Aging Mill remains in need of capital
injection and continues to suffer from sporadic breakdowns. Despite the rand decline
since November margins remain tight and cash continues to be squeezed. Although
Prices out the Mill lifted marginally, costs continued to escalate. There have been a
number of key resignations in both the Mill and the sales team that are being
managed through the ‘Less is More’ Program.
3.2 Forestry update
Delivered timber volumes remain firm despite the ongoing drought, as global and
local demand for timber remains healthy. Although the sector is facing both wage
and cost inflation, timber prices through the early part of 2016 have lifted. Masonite
continues to invest in our Silviculture planting plan despite the difficult cash situation.
The management team has actively reached out to Employees, Suppliers and Customers over
this period in order to both keep them abreast of the developing situation, and ensure that
the business is steady. The leadership remains engaged on the agenda and working closely
with the business rescue team to ensure the best possible result for the business.
4. Transaction process
Masonite has two divisions, the Forestry division consisting of 7 Eucalyptus plantation in KZN
and the Mill division, which has a manufacturing operation in Estcourt. It is an attractive
investment opportunity for investors looking for exposure to the forestry and/or the
engineered wood product sector. A decision was taken to appoint the Corporate Finance
division of Investec Bank Limited as Transaction Advisors to assist in the transaction process.
The transaction process commenced in February 2016 with the distribution of an Information
Memorandum to over 50 potential bidders. Considering that the Business is under
supervision, the timeline for the transaction has been limited to three months, with a closure
date at the end of April 2016.
Indicative non-binding offers were received from potential bidders for the business or its 2
separate divisions on 11 March 2016, being phase 1 of the transaction process.
A short list of bidders has been chosen to participate in phase 2 of the transaction process.
Phase 2 bidders will engage in a more rigorous due diligence process, with binding offers being
due by 15 April 2016.
5. Business Rescue Plan
Creditors voted unanimously in favour of extending the publication of the Business Rescue
Plan until 30 April 2016 to enable the transaction process to be completed. On acceptance of
a binding offer, the Business Rescue Plan will be published and circulated to all affected parties
including shareholders.
6. Voting rights of holders of issued securities
The Act only provides holders of issued securities the right to vote on the Business Rescue
Plan, if it alters the rights associated with the class of securities held by that shareholder. It is
unlikely that the Plan will alter shareholders’ rights.
7. Engagement with Parties
Management and the BRP continue to actively engage with the employees and the Company’s
creditors through their respective committees formed in terms of the business rescue
provisions of the Act. In addition, discussions are underway with Government through the
Department of Trade and Industry and IDC on possible rescue options.
PIERRE BERRANGÉ
SENIOR BUSINESS RESCUE PRACTITIONER
22 MARCH 2016
Sponsor
Nedbank Corporate and Investment Banking
Date: 22/03/2016 12:04:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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