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ESOR LIMITED - Voluntary suspension of Esor Limited Update on Business Rescue Proceedings

Release Date: 14/02/2019 09:00:00      Code(s): ESR       PDF(s):  
Voluntary suspension of Esor Limited – Update on Business Rescue Proceedings

(Incorporated in the Republic of South Africa)
(Registration number 1994/000732/06)
JSE code: ESR
ISIN: ZAE000184669

Voluntary suspension of Esor Limited – Update on Business Rescue
Proceedings in respect of Esor Construction (Pty) Ltd and Esor Limited

Shareholders are required to be updated on a quarterly basis on the status
of Esor Limited which shares were suspended on 17 August 2018.

Esor Limited’s major subsidiary Esor Construction (Pty) Ltd (“Esor
Construction” or “the Company”) was placed into business rescue on 13
August 2018. Esor Limited was placed into business rescue on 20 November
2018 after a meeting of Directors of Esor Limited where it was unanimously
resolved that the company be voluntary placed into business rescue as
envisaged in section 129 of the Act.

1. Esor Limited
       The Company’s main business is that of a public listed holding company
       and the relevant facts upon which the resolution was founded are:

1.1.     On or about 31 October 2018, ABSA Bank Limited demanded payment of
         R56,207,349.40 (Fifty six million two hundred and seven thousand
         three hundred and fourty nine rand and fourty cents) in terms of a
         cross guarantee for the due obligations of Esor Construction (Pty)
         Ltd in Business Rescue (Construction);
1.2.     According to the Company’s latest Management accounts, read with its
         Annual Financial Statements for the year ended on 28 February 2018,
         the Company does not have the funds available to honour the demand as
         the assets are illiquid in the form of investments and a debit loan
         account from Construction that is currently not recoverable;
1.3.     The inability of the company to obtain further short to medium term
         funding to make payment in terms of the demand.

2. In order to mitigate the negative effects of the above, the directors
   have implemented various strategies to ensure that the company are able
   to meet the Company’s obligations as and when they fall due. These

2.1.     Ensuring that adequate security is provided to the primary bankers to
         cover the facilities that are made available in terms of the
         facilities arrangements;
2.2.     Negotiations to dispose of certain development land.
3. Commencement of Business Rescue Proceeding and important dates:
         Board   of   directors   of       Esor   Limited   passed   Wednesday,   14   November
         resolution for Business Rescue                              2018
         File notice of resolution with CIPC                         Tuesday, 20 November 2018
         Company      nominates        a      business      rescue   Monday, 19 November 2018
       practitioner (“BRP”)
       CIPC confirms the appointment of BRP              Tuesday, 20 November 2018
       File notice to CIPC on BRP appointment            Tuesday, 20 November 2018
       Publish notice to affected parties of BRP         Tuesday, 27 November 2018
       First meeting of creditors                        Wednesday,   5   December
       First meeting of employees                        Wednesday,   5   December
       Date for publication of business rescue plan      Tuesday, 12 February 2019

2.1.     Initial Actions during Business Rescue:
3.1.   Very soon after their appointment the BRP’s engaged with the
       Guarantors, the Shareholders and Absa Bank and focused their
       attention on stabilising The Company and in consultation with
       Affected Persons considering and identifying all possibilities to
       restructure the affairs of The Company.

3.2.   Thereafter, the BRPs have also engaged with the Shareholders, on the
       requirements of resuscitating The Company or its business. The BRPs
       have critically assessed all the options available in order to
       restructure either The Company or its business.

4. Esor Construction

       4.1   Status of the Company when business rescue commenced:
             The Company’s liabilities as at the Commencement Date could be
             as high as cR597m whilst the estimated forced sale value of
             the Company’s assets is only R122,7.

       4.2   Business Rescue process:
             Since the commencement of Business Rescue Proceedings certain
             contracts between The Company and employers have been
             terminated and this enabled the BRPs to allow certain
             guarantors to complete some contracts.

       4.3    The BRPs have determined that upon the immediate liquidation
              of The Company only the secured creditors defined as Excluded
              Creditors in the Business Rescue Plan and Employees (some 46
              cents in the Rand on their retrenchment packages) will receive
              money. Concurrent trade creditors and sub-contractors will
              receive no payment. Liquidation should therefore be avoided.

       4.4   The basics of the proposal to creditors:
             The Business Rescue Plan provides for and governs how and when
             the proceeds of the realisation of the Assets of the Company
             will be utilised to settle the Creditors of the Company. It
             provides that the secured or excluded creditors will remain
             creditors and rely on its security and that the proceeds of
             certain Group Company Loans against property owning companies
             in the Group will be awarded to Trade Creditors and Sub-
            This Business Rescue Plan deals with and governs the proving of
            Claims and the subsequent payment of Creditors from the cash
            realised from the proceeds of the Group Company loans and the
            appointment of a Receiver for Creditors for that purpose.

      4.5   The impact of this Business Rescue Plan on Shareholders of the
            The Business Rescue Plan specifically does not alter the rights
            of any class of shareholder/s of the Company and contemplates
            the return of control of the Company to its board of directors.

      4.6   End of business rescue:
            The proposed Business Rescue Plan envisages the end of business
            rescue after the adoption of the BR Plan. The BRPs will file a
            notice of substantial implementation, returning control of the
            Company to its directors but continue with its work as Receiver
            for Creditors.

5. Remuneration of BRP

5.1. The company agrees to pay the BRP with regard to the actual time spent
in attending to his duties the statutory rate of R2, 000.00 (exclusive of
VAT) per hour; and

4.2 a reimbursement to the BRP for the actual cost of any disbursements
made and expense incurred on behalf of the company in the normal course of
what is reasonably expected in execution of the BRP’s functions during

6. Business Rescue Practitioner’s statement

The joint BRP’s are still of the view that there is a reasonable prospect
to develop and implement a business rescue plan for The Company that will
ensure that it, upon acceptance of the business rescue plan, will continue
in existence on a solvent basis, but this will require a reorganization of
the financial affairs of The Company and a consequential arrangement
between The Company and its Creditors regarding its liabilities.

14 February 2019

Vunani Corporate Finance

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