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Release Date: 03/03/2016 14:00
Code(s): BFS
Wrap Text
Incorporated in the Republic of South Africa
Registration Number: 1996/006595/06
ISIN: ZAE000083655
(?Blue? or ?the Company? or ?the Group?)

Shareholders are referred to the announcements published on the Stock Exchange News Service (?SENS?) since 26 June 2013, whereby shareholders were advised of the Company?s voluntary suspension of trading in Blue Securities, as well as the various quarterly update and other announcements published on SENS since then, whereby shareholders were updated on the developments at Blue. Recapitalisation
The rescue package negotiated by Mayibuye Group (Pty) Ltd (?Mayibuye?) in December 2010, envisaged the recapitalisation of the Blue Group, through the Subscription Agreement, and its ancillary agreements, to a maximum value of ZAR 1, 319 billion consisting of:
- The subscription by Mayibuye Group (Pty) Ltd (?Mayibuye?) through a suite of agreements including Amended and Restated Subscription Agreement (?Subscription Agreement?) in the amount of ZAR163 million;
- In terms of the Debt Rescheduling Agreement (?DRA?) a maximum of R1,156 billion as follows: o The first conversion of debt into equity through the Early Conversion Agreement to the value of ZAR 275 million completed in the 2011 financial year;
o The second conversion of debt into equity through the Second Early Conversion Agreement to the value of ZAR 406 million completed in the 2013 financial year; o A final conversion of up to ZAR475 million of debt depending on the Distribution plan as contemplated in the DRA resolved in the 2015 financial year.
As previously advised the debts in relation to the R475 million were derecognised as at December 2015 and can now, in terms of the DRA, only be paid from impaired assets that has been recovered net after costs. There are however litigation that may impact on this. Banc ABC Litigation
Banc ABC Zambia, despite being party to the dispute resolution proceedings instituted by the lender committee in respect of the Distribution Plan in South Africa during the 2014 financial year, also instituted legal action against Blue in Zambia and Botswana.
The basis of their claim in Zambia was that the DRA merely constituted a ?payment holiday? and upon termination of same the original facility agreements would once again be enforceable. In other words that there was no capitalisation envisaged in terms of the DRA. The Honourable Court found that
1. The DRA as concluded amended the provisions of the original facility agreement concluded with Banc ABC. As such the original facility agreement was amended by the DRA and the entire DRA is incorporated into the original facility agreement ;
2. Banc ABC Zambia would need to file a certificate of balance with the registrar of the court to prove the quantum of their claim;
3. Banc ABC Zambia would be entitled to execute against their securities; 4. Banc ABC Zambia would have no claim against those loan assets ring-fenced in terms of the recapitalisation by Mayibuye;
5. Should there remain an amount due to Banc ABC Zambia subsequent to execution against the securities, Banc ABC can convert debt into equity or only be paid from impaired assets as per the DRA.
The DRA made provision for payment to the DRA Lenders in terms of the Distribution Principles from the proceeds of the assets referred to in point 3 above, after deduction of the relevant cost incurred by Blue in respect of its collections thereof and payment of certain pre-existing debts of the Blue Group. Unfortunately, the Honourable Court did not clarify this aspect and in particular the issue of determining what gross assets may be executed against in order to avoid indirect execution against the ring fenced assets as referred to in point 4.
Based on the aforegoing and the steps necessary in order to bring this ma
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