Wrap Text
Declaration Data Announcement
BASIL READ HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1984/007758/06)
(Basil Read or the Company)
ISIN: ZAE000029781
Share code: BSR
NOT FOR DISTRIBUTION TO ANY PERSON LOCATED OR RESIDENT IN THE UNITED STATES OF AMERICA (“UNITED STATES”)
OR IN ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT
DECLARATION DATA ANNOUNCEMENT AND TERMS OF THE BASIL READ PARTIALLY UNDERWRITTEN RENOUNCEABLE
RIGHTS OFFER
1. Introduction
Basil Read shareholders (“Shareholders”) are referred to the results of general meeting announcement
released by Basil Read on 4 December 2017 on the Stock Exchange News Service (“SENS”) of the JSE
Limited (“JSE”), wherein Shareholders were advised that the necessary resolutions to implement a rights offer
(“Rights Offer”) had been passed and accordingly the Rights Offer would now proceed.
Such resolutions included the increase of Basil Read’s authorised stated capital from 300 000 000 Basil Read
Ordinary Shares and 33 607 507 “A” Ordinary Shares to authorised stated capital of 6 000 000 000 Basil Read
Ordinary Shares and 33 607 507 “A” Ordinary Shares by the creation of a further 5 700 000 000 Basil Read
Ordinary Shares.
2. Salient terms of the Rights Offer
Basil Read proposes to raise R300 million (excluding the potential R19 094.22 proceeds from the rights
attached to Basil Read’s treasury shares) through an offer of approximately 1 363 636 364 Rights Offer shares
(“Rights Offer Shares”) at a price of R0.22 per Rights Offer Share (“Rights Offer Issue Price”) in the ratio of
1 035.45602 Rights Offer Shares for every 100 existing Basil Read ordinary shares (“Basil Read Shares”) held
on the initial record date for the Rights Offer, being Friday, 9 February 2018. The Rights Offer Issue Price
represents a 63% discount to the closing price on Friday, 19 January 2018. Application will be made to the
JSE for the listing of the letters of allocation and the Rights Offer Shares on the securities exchange of the
JSE as follows:
• letters of allocation in respect of the Rights Offer Shares will be listed from the commencement of business
on Wednesday, 7 February 2018 to the close of business on Tuesday, 20 February 2018, both days
inclusive, under the JSE code: BSRN and ISIN: ZAE000253886; and
• the Rights Offer Shares will be listed with effect from the commencement of business on Thursday, 22
February 2018.
The Rights Offer Shares will, upon allotment and issue, rank pari passu with all other shares of the same
class.
The Rights Offer will allow for excess applications. The right to apply for additional Rights Offer Shares is
transferable on renunciation.
Certificated Shareholders wishing to apply for excess Rights Offer Shares should complete the Form of
Instruction enclosed with the Rights Offer circular (“Rights Offer Circular”) in accordance with the instructions
contained therein and return it to the transfer secretaries so as to be received by the transfer secretaries by
no later than 12:00 p.m. on Friday, 23 February 2018.
Dematerialised Shareholders wishing to apply for excess Rights Offer Shares should instruct their CSDP or
Broker, in terms of the custody agreement entered into between themselves and their CSDP or Broker, as to
the number of excess Rights Offer Shares for which they wish to apply.
An announcement will be released on SENS on or about Monday, 26 February 2018 stating the results of the
Rights Offer and the basis of allocation of any additional Rights Offer Shares for which application is made.
3. Rationale for the Rights Offer
As announced on SENS on 28 August 2017, Basil Read reported a net loss of R 474.1 million for the 6 months
ended 30 June 2017 compared to a profit of R73.5 million for the 6 months ended 30 June 2016, mainly
attributed to the provisions on contracts within the roads division and write down of goodwill as a result of a
decline in earnings of that division, claims recoveries being significantly below expectations, cost overruns
(including penalties from delays) on certain of the Company’s distressed projects, as well as realising bad
debts. In terms of Basil Read’s accounting policy, where contracts are expected to post a loss on completion,
a provision is created for the full loss in the period determined. Consequently, a number of provisions for loss-
making contracts were created during the first half of the financial year ended 31 December 2017.
More importantly, a few legacy cash-depleting projects over the past years negatively impacted the cash
reserves of the Company, resulting in cash flow being constricted and Basil Read being unable to meet future
cash requirements without recapitalisation.
The Directors recognise that funding is critical and, the board of Basil Read resolved to recapitalise the balance
sheet to position Basil Read for the current environment. The first phase of the recapitalisation involved
seeking a bridge facility from the IDC of R150 million (“IDC Bridge Loan”). The first tranche of R61 million of
the R150 million bridge funding from the IDC was approved on 14 August 2017 and drawn down on
21 September 2017, the second tranche of R89 million was approved on 2 October 2017 (with R46 million
being drawn down on 16 November 2017 and the remaining R43 million being drawn down on 4 December
2017) to meet existing commitments. The IDC Bridge Loan and the Debt Standstill Agreement (as detailed in
the SENS announcement issued by Basil Read on 5 December 2017) (“Debt Standstill Agreement”) provide
the group with the necessary breathing room and stability to focus on operations, while long-term funding is
required to recapitalise the group and provide it with the necessary platform and working capital to carry out
its operations efficiently (without any cash flow limitations), while implementing its strategic objectives.
The second phase of the recapitalisation is this Rights Offer targeting a capital raise of R300 million.
In addition to recapitalising the balance sheet of Basil Read, the group is undergoing a strategic repositioning,
including inter alia the following:
• rightsizing overheads for each division;
• corporate overhead restructure including reducing head-office rent;
• fixing and closing distressed contracts;
• renewed focus on resolving claims timeously;
• investing in and growing the higher margin businesses in the civils, developments and mining divisions
to enable the Company to generate more operating cash flow; and
• selling certain non-core assets to allow Basil Read to reduce balance sheet risk and generate free cash.
The disposals are anticipated to be made in the 2018 financial year.
Basil Read recognises that it is crucial to raise the necessary funds as mentioned above. Strategic re-
alignment and the removal of the liquidity constraint should have a significant positive impact on the group,
including inter alia:
• allowing the group to focus on higher margin and more profitable projects;
• enhancing operational and financial efficiency across the group with improved net margins;
• reducing borrowing costs over the longer term;
• securing guarantees at more favourable rates;
• settling overdue creditors and maintaining the relationships necessary to carry out the profitable projects
into the future;
• early payments resulting in material settlement discounts;
• avoiding penalties by timeous payment of contractors resulting in projects being completed on time; and
• managing maintenance programs of capital equipment rather than spending significant amounts on
emergency capital expenditure.
A cash improved and strategically repositioned business should result in improved profitability going forward.
4. Commitments and underwriting
Shareholders attention is drawn to the minimum subscription read with the restrictions on
Shareholder commitments and support, the underwriting as well as the milestones under the Debt
Standstill Agreement detailed below.
The following Shareholders have undertaken to follow or support the following of their rights for approximately
R166 million (the “Commitments”) subject to the restrictions below:
Number of Rights Offer
Number of Basil Shares in the ratio of Percentage
Read Ordinary 1 035.45602 for every Letters of allocation of total
Shares held before 100 Basil Read Rights Offer
Name of Ordinary Shareholder the Rights Offer Ordinary Shares held to be followed Shares
Allan Gray Proprietary Limited 31 356 373(1) 324 681 452 324 681 452 23.8
PSG Asset Management
11 983 213(2) 124 080 900 124 080 900 9.1
Proprietary Limited
Prudential Investment Managers
(South Africa) Proprietary 11 704 576(3) 121 195 737 121 195 737 8.9
Limited
Industrial Development
Corporation of South Africa 9 090 909(4) 94 132 365 94 132 365 6.9
Limited (“IDC”)
SIOC 7 883 243 81 627 514 81 627 514 6.0
Ashburton Fund Managers
Proprietary Limited (in its
capacity as a discretionary FSP 942 363 9 757 754 9 757 754 0.7
of the Ashburton Dynamic
Equity Hedge Fund)
Total 72 960 677 755 475 722 755 475 722 55.4
(1) Allan Gray Proprietary Limited is the appointed discretionary investment manager of clients who are
beneficial and/or registered holders of Basil Read Ordinary Shares. Allan Gray Proprietary Limited is not
the beneficial owner of the shares and has irrevocably undertaken to procure that its clients follow their
rights. This commitment is subject to the continuing mandates of its clients in their current form and in the
absence of any instructions from its clients to the contrary. Allan Gray Proprietary Limited has limited its
commitment such that its clients’ rights need not be followed by the clients to the extent (and only to such
extent) that the exercise thereof would result in Allan Gray Proprietary Limited’s clients’ aggregate holding
of the issued shares in the capital of Basil Read exceeding 25% thereof.
(2) PSG Asset Management Proprietary Limited is the registered beneficial owner (or alternatively has the
mandate to control the voting rights) of the Basil Read Ordinary Shares. PSG Asset Management
Proprietary Limited is in support and will exercise its rights in respect of the Basil Read Ordinary Shares.
(3) Prudential Investment Managers (South Africa) Proprietary Limited is the appointed discretionary
investment manager of clients who are beneficial and/or registered holders of Basil Read Ordinary Shares.
Prudential Investment Managers (South Africa) Proprietary Limited is not the beneficial owner of the shares
and has irrevocably undertaken to recommend to its clients to follow their rights. This commitment is subject
to the continuing mandates of its clients in their current form and in the absence of any instructions from its
clients to the contrary. Prudential Investment Managers (South Africa) Proprietary Limited has limited its
clients’ commitment to follow their rights to the effect that the maximum aggregate holding by its clients will
not exceed 10% of the total number of issued Basil Read Ordinary Shares post the Rights Offer.
(4) The IDC’s total holding in terms of following its rights, 8 400 263 Basil Read Ordinary Shares which the
IDC holds as security pre-Rights Offer, as well as the underwritten shares (per the underwriting below) is
limited to 33% of the total number of Basil Read Ordinary Shares post the Rights Offer.
Furthermore, to provide the Company and Shareholders with the certainty of a successful implementation of
the Rights Offer, the Company has entered into an underwriting agreement with the IDC to underwrite up to a
maximum amount of R89.1 million.
The effect of the undertakings and the underwriting commitment referred to above is that the Rights Offer is
partially underwritten and committed to the value of R255 million subject to the maximum post rights
shareholding restrictions outlined above and the impact of such restrictions as reflected in Annexure 5 to the
Rights Offer Circular. The potential result of these restrictions is that the effective committed and supported
and underwritten amount is R168 million if none of the other Ordinary Shareholders follow their rights and no
excess applications are made. The Rights Offer is conditional on receiving a minimum aggregate subscription
amount of R168 million which addresses this worst-case scenario. In addition, in terms of the Debt Standstill
Agreement, the Company has agreed a milestone with the standstill creditors to raise a minimum of R300
million by way of the Rights Offer by 31 March 2018. Failure to raise the R300 million could result in a default
under the Debt Standstill Agreement. Unless such milestone is relaxed or waived by the standstill creditors,
it may result in the termination of the Debt Standstill Agreement and the standstill creditors demanding
immediate repayment of the outstanding debt owed to them by the group which would have a material adverse
impact on the group. If any potential asset disposals or other mechanisms to fund the group were to be
unsuccessful, insufficient or delayed, Basil Read may cease to be a going concern and be unable to pay its
debts, which may lead to business rescue or liquidation.
Further details of the underwriting agreement and Commitments will be set out in the Rights Offer Circular.
5. Entitlement
The allocation of Rights Offer Shares will be such that Shareholders will not be allocated a fraction of a
Rights Offer Share and as such any entitlement to receive a fraction of a Rights Offer Share which:
• is less than one?half of a Rights Offer Share, will be rounded down to the nearest whole number; and
• is equal to or greater than one-half of a Rights Offer Share but less than a whole Rights Offer Share, will
be rounded up to the nearest whole number.
6. Conditions precedent
The implementation of the Rights Offer is subject to the JSE granting a listing for the letters of allocation and
the Rights Offer Shares on the securities exchange of the JSE in respect of the Rights Offer.
7. Foreign shareholders
Foreign Shareholders may be affected by the Rights Offer, having regard to prevailing laws in their relevant
jurisdictions. Such foreign Shareholders should inform themselves about and observe any applicable legal
requirements of such jurisdiction in relation to all aspects of this announcement that may affect them, including
the Rights Offer. It is the responsibility of each foreign Shareholder to satisfy himself as to the full observation
of the laws and regulatory requirements of the relevant foreign jurisdiction in connection with the Rights Offer,
including the obtaining of any governmental, exchange or other consents or the making of any filing which
may be required, the compliance with other necessary formalities and the payment of any issue, transfer or
other taxes or other requisite payments due in such jurisdiction.
The Letters of Allocation and the Rights Offer shares have not been and will not be registered under the U.S.
Securities Act of 1933, as amended (“U.S. Securities Act”), or under any securities laws of any state or other
jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced,
transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable
exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and
applicable state and other securities laws of the United States. There will be no public offer of the Letters of
Allocation and the Rights Offer Shares in the United States. Neither the U.S. Securities and Exchange
Commission (“SEC”) under the U.S. Securities Act nor any U.S. federal or state securities commission has
registered, approved or disapproved the Rights Offer Shares or passed comment or opinion upon the accuracy
or adequacy of the Rights Offer Circular. Ordinary Shareholders who are citizens or residents of the United
States are advised that the Rights Offer Shares have not been and will not be registered under the U.S.
Securities Exchange Act of 1934, as amended. Accordingly, the Company is not extending the Rights Offer
into the United States unless an exemption from the registration requirements of the U.S. Securities Act is
available.
Rights Offer Shares will be provisionally allotted to all Ordinary Shareholders on the register at the initial record
date for the Rights Offer, including restricted shareholders referred to below. However, the accompanying
Form of Instruction (where applicable) will not be sent to Ordinary Shareholders with registered addresses or
who are resident or located in the United States or in any jurisdiction where the extension or making of the
Rights Offer would be unlawful or in contravention of certain regulations (each an “Excluded Territory”) on
such initial record date (referred to herein as Restricted Shareholders) and Letters of Allocation will not be
credited to the securities account of the CSDP or Broker of Ordinary Shareholders who are Restricted
Shareholders, except where the Company is satisfied that such action would not result in contravention of any
registration or other legal requirement in any jurisdiction. Restricted Shareholders (subject to such exceptions)
will be treated as Ordinary Shareholders whose Letters of Allocation have lapsed.
8. Salient dates and times
The proposed salient dates and times in respect of the Rights Offer are set out below.
Shareholders are advised to trade with care given the amendments to the standard JSE corporate
action timetable as reflected below.
2018
Declaration date announcement released on SENS on Monday, 29 January
Rights Offer declaration announcement published in the press on Tuesday, 30 January
Finalisation date announcement released on SENS by 11:00 on Wednesday, 31 January
Circular available on Basil Read’s website at www.basilread.co.za Monday, 5 February
Last day to trade in Basil Read Ordinary Shares in order to participate in the Rights Offer Tuesday, 6 February
Listing and trading of Letters of Allocation on the JSE under JSE code: BSRN and ISIN: Wednesday, 7 February
ZAE0000253886 commences at 09:00 on
Basil Read Ordinary Shares commence trading on the JSE ex-Rights Offer entitlement at Wednesday, 7 February
09:00
Rights Offer Circular and Form of Instruction distributed to Certificated Shareholders Thursday, 8 February
Record Date for determination of Ordinary Shareholders entitled to participate in the Rights Friday, 9 February
Offer at 17:00 on (Initial Record Date)
Dematerialised Shareholders will have their accounts at their CSDP or Broker automatically Monday, 12 February
credited with their entitlement
Certificated Shareholders on the Register will have their entitlement credited to their accounts Monday, 12 February
held with the Transfer Secretaries
Rights Offer opens at 09:00 on Monday, 12 February
Rights Offer Circular distributed to those Dematerialised Shareholders who have elected to Tuesday, 13 February
receive documents in hard copy
Last day to trade Letters of Allocation on the JSE Tuesday, 20 February
Rights Offer Shares listed and trading therein commences on the JSE Thursday, 22 February(10)
Payment to be made and Form of Instruction to be lodged with the Transfer Secretaries by Friday, 23 February
Certificated Shareholders by 12:00 p.m.
Rights Offer closes at 12:00 p.m. Friday, 23 February
Record Date for Letters of Allocation (Final Record Date) Friday, 23 February
Results of Rights Offer and basis of allocation of excess Rights Offer Shares announced on Monday, 26 February
SENS
Results of Rights Offer and basis of allocation of excess Rights Offer Shares published in the Tuesday, 27 February
press on
Rights Offer Shares issued Tuesday, 27 February(10)
Dematerialised Shareholders’ accounts updated and debited by CSDP or Broker (in respect Tuesday, 27 February(10)
of payment for Rights Offer Shares)
Certificates distributed to Certificated Shareholders (in respect of Rights Offer Shares) Tuesday, 27 February(10)
Rights Offer Shares in respect of successful excess applications (if applicable) issued on or Thursday, 1 March
about
CSDP or Broker accounts of Dematerialised Shareholders credited/debited and updated with Thursday, 1 March
Rights Offer Shares in respect of successful excess applications (if applicable)
Share certificates in respect of successful excess applications (if applicable) posted to Thursday, 1 March
Certificated Shareholders by registered post on or about
Refund payments made by EFT or cheques posted, as the case may be, to Certificated Thursday, 1 March
Shareholders in respect of unsuccessful excess applications (if applicable) on or about
Notes:
1. All references to dates and times are to local dates and times in South Africa.
2. Dematerialised Shareholders are required to inform their CSDP or Broker of their instructions in terms of the
Rights Offer in the manner and time stipulated in the agreement governing the relationship between the
Shareholder and their CSDP or Broker.
3. Share certificates may not be dematerialised or rematerialized between Wednesday, 7 February 2018 and
Friday, 9 February 2018, both days inclusive.
4. Dematerialised Shareholders will have their accounts at their CSDP or Broker automatically credited with their
rights and Certificated Shareholders will have their rights credited to their accounts at the Transfer Secretaries.
5. CSDPs effect payment in respect of Dematerialised Shareholders on a delivery-versus-payment method.
6. Share certificates will be posted at the risk of the relevant Certificated Shareholders (or their renouncees).
7. Refund payments will be made or transferred at the risk of the Certificated Shareholders (or their renouncees).
8. Any changes to the dates and times will be announced on SENS.
9. Finalisation announcement
It is anticipated that the finalisation announcement for the Rights Offer will be released on SENS on
Wednesday, 31 January 2018.
10. These dates have been extended beyond the standard JSE corporate actions timetable in order to cater for
the manual allocation arising out of the limits placed on the Commitments as outlined in paragraph 4 above.
Shareholders should trade with care on Wednesday, 21 February 2018 as Rights Offer Shares will only
be issued on Tuesday, 27 February 2018.
9. Rights Offer Circular
Further details of the Rights Offer will be set out in the Rights Offer Circular which is expected to be distributed
to certificated Shareholders on Thursday, 8 February 2018 and to dematerialised Shareholders on Tuesday,
13 February 2018.
The Rights Offer Circular is expected to be made available on the Company’s website www.basilread.co.za
on Monday, 5 February 2018.
Johannesburg
29 January 2018
Company Secretary
A Ndoni
Corporate Advisor and Transaction Sponsor
Tamela Holdings Proprietary Limited
Legal Adviser
Tugendhaft Wapnick Banchetti & Partners
Date: 29/01/2018 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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