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Loan Agreement with a Related Party and Renewal of Cautionary Announcement
TRUSTCO GROUP HOLDINGS LIMITED
Incorporated in the Republic of Namibia
(Registration number 2003/058)
Registered as an external company in South Africa
(External registration number 2009/002634/10)
NSX share code: TUC
JSE share code: TTO
ISIN Number: NA000A0RF067
(“Trustco” or “the Company”)
LOAN AGREEMENT WITH A RELATED PARTY AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
Trustco shareholders (“Shareholders”) are referred to the cautionary announcement which was
published on SENS on 28 September 2018, advising Shareholders that discussions with several parties
have progressed to such a level that the board is of the opinion that if it’s successfully concluded, may
have a material effect on the price of the Company’s securities, and that shareholders dealing in the
equities of the Company should therefore exercise caution.
Shareholders are advised that one of the transactions referred to is a capital raise transaction through
a proposed loan agreement with the majority shareholder of the Company.
1. Loan with a Related Party
Shareholders are advised that Dr Quinton van Rooyen, together with his investment vehicle
(being Next Investments (Pty) Ltd) - collectively hereinafter referred to as “the Family”, has
entered into a loan agreement with Trustco, the material terms being:
• The Family will provide a loan of up to a maximum amount of NAD 1 billion (the “Capital
Amount”) to the Company.
• The loan is repayable on 31 March 2024 (the “Due Date”).
• The loan shall be an interest only loan with the Capital Amount repayable as a bullet payment,
in cash on the Due Date, unless the Family exercise their option to have the sum of the Capital
Amount settled in TTO shares (the “Conversion Option”).
• The Family will dispose of a portion of its Trustco Group Holdings Limited securities (“TTO
shares”) to investors that will include, but not be limited to institutions, individuals,
corporates and existing shareholders to fund the Capital Amount;
o The current issued share capital of Trustco is 974 265 619 and the Family currently
owns 535 854 120 (Five Hundred and Thirty Five Million Eight Hundred and Fifty Four
Thousand One Hundred and Twenty) TTO shares representing 55% of the issued TTO
shares.
o Shareholders are referred to the SENS announcements published on 4 and 21
September 2018 in terms whereof it was reported that the Huso transaction had
closed. The Company and the Family are confident that the earn out in terms of the
Huso transaction will be achieved, and subsequently the Family will own 1 164 643
120 (One Billion One Hundred and Sixty Four Million Six Hundred and Forty Three
Thousand One Hundred and Twenty) TTO shares representing 72.65% of the issued
TTO shares.
o After the proposed sale of a relatively small portion of the Family’s equity, the Family
will maintain its significant controlling interest in the Group, while the Group’s share
float will be increased, thereby increasing the number of shares that may be freely
traded, which generally benefits all shareholders.
o The proposed sale will not lead to a change of control in Trustco. The Family will still
have the vast majority of its net worth in TTO shares.
o Each and any sale of any tranche of the Family’s securities will be announced on SENS.
• The loan will be provided to Trustco as an unsecured subordinated shareholders loan.
• Interest on the Capital Amount will be calculated monthly in arrears at the prime interest rate
of Namibia as published from time to time by the Bank of Namibia;
o Currently the prime interest rate of Namibia is published at 10.50%. The average cost
of capital for the group is currently approximately 14%;
o A portion of the current funding lines of Trustco is USD denominated whilst this loan
would be advanced and repayable in NAD and is therefore not be subject to currency
volatility.
• Interest will be paid monthly.
• The actual loan amount may be for a lesser amount depending on the growth capital
requirements of the Company as determined by the independent non-executive board
members of the Company, at any time before 30 June 2019.
• During the term of the Loan, the Family, in its sole discretion, have the right and may elect to
postpone or write-off any portion of the Capital Amount. The Family would give 30 (thirty)
days’ notice to the Trustco board of the Family’s decision to postpone or write-off the Capital
Amount or any portion thereof which was on lend to the ’s subsidiaries or operating segments.
The Company would be obligated to align the Capital Amount accordingly to reflect the
Family’s decision in the Borrower’s subsidiaries or operating segments.
• Alternatively, the Family, in its discretion may elect to exercise the Conversion Option and
receive the Capital Amount not as a single payment in cash on the Due Date, but rather by
way of conversion of the Capital Amount into TTO shares, in part or in full, at a conversion
price per TTO share which shall be determined based on the periods during which the
Conversion Option is exercised as set out below;
o Between 1 January 2020 – 31 March 2020 at a rate of NAD 21.49 per share to a
maximum number of 46 533 271 TTO shares;
o Between 1 January 2021 – 31 March 2021 at a rate of NAD 31.91 per share to a
maximum number of 31 338 138 TTO shares;
o Between 1 January 2022 – 31 March 2022 at a rate of NAD 42.72 per share to a
maximum number of 23 408 239 TTO shares;
o Between 1 January 2023 – 31 March 2023 at a rate of NAD 57.93 per share to a
maximum number of 17 262 213 TTO shares ;
o Between 1 January 2024 – 31 March 2024 at a rate of NAD 74.79 per share to a
maximum number of 13 370 771 TTO shares.
o The highest closing price of TTO shares since listing was NAD 13.49 per share.
• The independent non-executive directors of the Borrower may during the abovementioned
periods elect to make an early repayment of the Capital Amount, in full or in part, by giving
30 (thirty) days’ notice to the Lender of its intention;
o The Borrower shall not be penalised for any early payments made to the Lender in
terms of the Capital Amount, prior to the Due Date.
o The Lender may, upon receipt of the notice, to make an early repayment exercise its
discretion and elect to receive capital repayments, in part or in full, by way of a
conversion or cash for the outstanding Capital Amount or a portion thereof into TTO
shares on the rate per share as set out above.
• This loan is provided to the Company in addition to:
o the interest bearing shareholders loan at prime rate as a result of the closing of the
Huso transaction in the amount of NAD 296 million in the Resources Segment (Huso
Amendment Circular, issued to Shareholders on 11 May 2017, page 42);
o the management and surety fees for the financial year ending 31 March 2018 had
been written off, totalling NAD 61.5 million (AFS 2017/2018 page 43 as published on
www.tgh.na);
o indemnification in the amount of USD 25 million for the Meya project for a period of
4 years as from 31 January 2017 (SENS announcement dated 23 August 2016);
o surety pledged for the benefit of the Company to the value of NAD 1.972 billion (AFS
2017/2018 page 53 as published on www.tgh.na ); and
o assets pledged for the benefit of the Company in the amount of NAD1.4 billion (AFS
2017/2018 page 53 as published on www.tgh.na)
2. Use of funds
• The Capital Amount is earmarked to be deployed for growth throughout the Trustco group of
companies, but primarily in the Resources Segment:
o Shareholders are referred to the SENS announcement dated 9 August 2018 where it
was reported by SRK Consulting (Canada) Inc. in their interim technical report for the
Meya Project, that the exploration results to date indicates that both the hurdle
components have been achieved, being a resource of at least 3 million carats or at
least USD 1 billion valued at international diamond market prices.
o With the geo-economic potential having been verified, Meya is in the process of
evaluating various options to increase the overall mine configuration and achieve an
optimal mine plan. This includes plant optimisation and acquiring additional mining
fleet as well as securing a 25 year mining license in due course. The intention is to
increase production first to 165,000 carats per annum and subsequently to 300,000
carats per annum.
• The Banking and Finance Segment will also benefit from the loan by:
o financing growth of the Trustco Finance student loan book to the stated target of NAD
1 billion in the next 18 months (Integrated Annual Report 2017/2018 page 112,
available at www.tgh.na); and
o further capitalising Trustco Bank to provide mortgage bonds in the Namibian property
market, SME loans, personal loans and commercial loans. Trustco Bank’s ability to
fund mortgage loans to buyers of the Group’s properties is a material competitive
advantage. (Shareholders are referred to the SENS announcement regarding the
update in the Insurance Segment in re: Namibian Land Conference dated 8 October
2018)
• The Insurance Segment (and its investments) will be capitalised to take advantage of attractive
opportunities in the current market conditions.
• A portion of the loan will be applied towards the current debt restructuring of the Group. The
Company is in the process of negotiating a formal capital standstill up to 15 June 2019 with
the International Lenders Group. During the agreed capital standstill a formal debt
restructuring agreement will be completed and finalised.
3. Rationale for the Loan
• Namibia, where the bulk of Trustco’s operations are located, experienced nine consecutive
quarters of negative economic growth. This transaction will bolster growth capital for Trustco,
Namibia and the other countries in which it operates.
• The investment in the Resources Segment acts as a natural currency hedge, as this generates
USD revenue.
• The sale of a portion of the Family’s equity and entering into a subsequent loan agreement
with the Family will not have the immediate effect of further dilution for existing shareholders
in Trustco.
• The sale of a portion of the Family’s equity will improve liquidity and the free float of TTO
shares in the market.
4. Circular to Shareholders
• Dr Quinton van Rooyen is a related party as contemplated in paragraph 10.1 of the JSE Listings
Requirements (“Listings Requirements”) as a director of Trustco and is also entitled together
with Next Investments (Pty) Ltd to exercise 10% or more of the votes able to be cast at a
Trustco general meeting. The Family is the majority shareholder in Trustco.
• The settlement mechanism of the loan by way of the potential issuance of TTO shares to the
Family should the Conversion Option be exercised, is considered to be a specific issue of shares
for cash as per 5.51 of the Listings Requirements (“Specific Issue”).
• Consequently, in terms of the Listings Requirements, the Specific Issue requires the approval
of Shareholders at a general meeting.
• The Family and its associates will be excluded from voting at the above general meeting.
• A circular containing full details of the Specific Issue as well as a notice to convene a general
meeting of Shareholders in order to consider and, if deemed fit, to pass with or without
modification, the resolutions necessary to approve and implement the Specific Issue, will be
made available to Shareholders in due course.
5. Renewal of cautionary announcement
• The loan by the Family is one of a number of transactions currently being negotiated by
Trustco and as such Shareholders are advised to exercise caution when dealing in the
Company’s securities until a further announcement is made.
• It is envisaged that the process of obtaining all Regulatory and Shareholders approval, as well
as providing the required Capital Amount will be concluded by 30 June 2019.
• The Company’s board approved the terms of this transaction on 5 October 2018.
• Shareholders would be kept abreast of the progress made in this regard via SENS.
6. Conclusion
• The loan provides Trustco the mechanism to access growth capital for key opportunities that
the Group is pursuing, without affecting debt covenant ratios or diluting Shareholders on
unfavourable terms.
• The growth opportunities in Trustco are significant and the Company is of the view that these
opportunities have the capacity to materially increase the earnings and cash flow of Trustco.
Windhoek, Namibia
8 October 2018
Amanda Bruyns
Company Secretary: Trustco Group Holdings Limited
JSE Sponsor
Vunani Corporate Finance
NSX Sponsor
Simonis Storm Securities Proprietary Limited
Date: 08/10/2018 04:50:00 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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