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Formation of joint venture to invest in European distressed debt
Transaction Capital Limited
(Incorporated in the Republic of South Africa)
Registration No: 2002/031730/06
JSE share code: TCP
ISIN: ZAE000167391
(“Transaction Capital” or “the Company”)
TransCapital Investments Limited
(Incorporated in the Republic of South Africa)
(Registration No. 2016/130129/06)
JSE debt code: TCII
FORMATION OF JOINT VENTURE TO INVEST IN EUROPEAN DISTRESSED DEBT
1. INTRODUCTION
Transaction Capital is pleased to advise shareholders that it has, through its wholly-owned subsidiary,
Transaction Capital Risk Services Holdings (Pty) Ltd (TCRS), entered into a joint venture arrangement
with Genki Group Limited (Genki), a company owned by the respective trusts of Transaction Capital
directors, Jonathan Jawno (Jawno), Michael Mendelowitz (Mendelowitz) and Roberto Rossi (Rossi)
(collectively referred to as the Founders), in order to invest in European non-performing loan portfolios
and special credit situations (collectively referred to as distressed debt). Each of Transaction Capital
and Genki have allocated €20 million to the joint venture.
2. RATIONALE
The European distressed debt market is a multiple of times larger than the South African and Australian
markets within which TCRS currently operates. Participants within this market are primarily credit
management and collection platforms, asset managers or private equity funds. Over recent years, the
Founders have established relationships with certain specialist credit managers and have identified an
attractive segment of this market for entry by the joint venture. This segment comprises smaller, high-
yield, off-market bespoke distressed corporate and consumer debt portfolios acquired and managed
by these selected specialist credit managers.
The joint venture will leverage off the existing infrastructure and network established by the Founders
to optimize these opportunities with the intention of achieving double digit hard currency returns and
further diversify its geographic earnings base. The investments will comprise direct co-investments,
partnerships with specialist credit managers in selected portfolios and investments in specifically
identified debt funds, thereby accessing the European distressed debt market without concentrated risk
to any particular distressed debt portfolio, asset type, collection platform or geographic region.
Leverage may be introduced as appropriate.
An initial investment by TCRS and Genki of approximately €3 million each is expected to occur within
Western Europe before Transaction Capital’s March 2019 half-year end. In time, TCRS intends to
progressively participate in more sizeable prospects with the ultimate intention to build a European
distressed debt business of scale, with the potential to leverage off TCRS’s South African low-cost
collection infrastructure and technology. This could be achieved without creating unnecessary business
integration costs.
3. TRANSACTION STRUCTURE
The following initial investment structure will be utilised:
- A subsidiary of TCRS, Transaction Capital Risk Services International (Pty) Ltd (TCRSI) will
subscribe for 50% of the shares in a newly established company, Turicum Ventures Ltd (Turicum).
- The other 50% shareholding will be held by Genki.
- A shareholders’ agreement between TCRSI and Genki will be entered into to govern the joint
venture arrangement, the terms of which will be approved by the independent non-executive
directors of the Audit, Risk and Compliance Committee. All shares in Turicum will rank equally and
all contributions to and returns from the joint venture will be made on an equal, pro-rata basis. No
fees will be charged between the parties.
- To the extent appropriate, alternate joint venture investment structures between TCRSI and Genki
may be considered.
4. RELATED PARTIES TRANSACTION
Jawno and Mendelowitz are executive directors of Transaction Capital, with Rossi being a non-
executive director. Each of Jawno, Mendelowitz and Rossi are contingent discretionary beneficiaries of
trusts that each own directly or indirectly an effective 9.72% of Transaction Capital. In addition, Jawno,
Mendelowitz and Rossi are also contingent discretionary beneficiaries of trusts that each own 33.3%
of Genki.
The transaction has been categorized as a small related party transaction in terms of section 10.7 of
the JSE Limited Listing Requirements (JSE LR).
5. FAIRNESS OPINION
Due to the joint venture nature of this transaction, the JSE Limited has dispensed with the requirement
to obtain a fairness opinion in terms of section 10.7 of the JSE LR.
Dunkeld West
19 December 2018
Enquiries:
Phillipe Welthagen - Investor Relations
Telephone: +27 (0) 11 049 6700
Sponsor:
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 19/12/2018 12:19:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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