GROUP FIVE LIMITED - Group Five Limited placed in business rescue and suspension of listing of Group Five shares

Release Date: 12/03/2019 10:27
Code(s): GRF
 
Wrap Text
Group Five Limited placed in business rescue and suspension of listing of Group Five shares

Group Five Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1969/000032/06)
Share code: GRF ISIN: ZAE000027405
("Group Five" or "the Company" or "the Group")

GROUP FIVE LIMITED PLACED IN BUSINESS RESCUE AND SUSPENSION OF LISTING
OF GROUP FIVE SHARES

Introduction

Group Five, its wholly-owned subsidiary, Group Five Construction Proprietary Limited ("G5
Construction"), and a number of other direct and indirect subsidiaries (collectively the "Group
Five Group") have for some time been experiencing cash flow difficulties emanating from,
among other things, significant operating losses and negative cash flows in G5 Construction
and its direct and indirect subsidiaries (“G5 Construction Group”) from operating activities.

In order to alleviate the cash flow constraints of the G5 Construction Group, bridge funding in
the sum of R650 million was sought by G5 Construction from a consortium of lenders (the
"Lending Consortium") and was granted to G5 Construction in April 2018 (the "Bridge Funding
Facilities").

As an element of the provision of the Bridge Funding Facilities, the Company and a number
of other companies within the Group Five Group guaranteed to the Lending Consortium the
payment and other obligations (collectively the "Debt Obligations") of (i) G5 Construction to
the Lending Consortium under or in relation to the Bridge Funding Facilities and (ii) various
members of the Group Five Group to individual members of the Lending Consortium in respect
of various other banking, guarantee and like facilities provided from time to time by those
individual members of the Lending Consortium to those members of the Group Five Group
(the "Relevant Guarantee Arrangements").

The Company's and G5 Construction Group's financial constraints were exacerbated following
the calling of the guarantees in issue of US$62,7million on or about 16 November 2018 and
$43,8 million on or about 6 December 2018, relating to the construction contract known as the
Kpone Gas and Oil-Fired Combined Cycle EPC Power Plant Contract which the client
terminated on or about 30 November 2018.

G5 Construction Group is currently conducting retrenchment proceedings and it is estimated
that a significant amount of severance pay will become payable to retrenched employees
pursuant thereto.

On 22 February 2019, G5 Construction sought additional bridge funding from the Lending
Consortium for the G5 Construction Group's immediate short term working capital
requirements. Whilst G5 Construction's management and board of directors at the time
believed that there was a reasonable prospect of this bridge funding being provided, on 4
March 2019, the Lending Consortium regrettably advised G5 Construction that its request for
this funding could not be accommodated given inter alia (i) the sums of money and/or
guarantee facilities already provided by the Lending Consortium and/or its individual members
to the Group Five Group, (ii) the lack of certainty that any further funds provided would
adequately meet G5 Construction Group's ongoing working capital requirements and (iii)
Group Five Group's inadequate balance sheet capabilities and income generating capabilities
to successfully service and repay existing debt and any further debt to be incurred.

Absent this bridge funding, and having obtained the prerequisite legal and accounting advice,
the board of directors of the Company has determined that Group Five and G5 Construction
were or would be facing circumstances constituting “financial distress” within the meaning of
the Companies Act No 71 of 2008 (“Companies Act”).

The financial distress of G5 Construction has a direct and like adverse impact on the
Company, by virtue of the fact that the Company has (pursuant to the Relevant Guarantee
Arrangements) bound itself as co-principal obligor with G5 Construction to the Lending
Consortium in respect of the Debt Obligations and therefore it appears to be reasonably
unlikely that the Company will be able to pay all of its debts as they fall due and payable within
the immediately ensuing six months.

As a result, the board of directors of Group Five and G5 Construction have resolved to place
each of these companies into business rescue in accordance with Chapter 6 of the Companies
Act. Group Five has resolved to appoint David Lake and Peter van den Steen of Metis
Corporate Advisory as business rescue practitioners for each of Group Five and G5
Construction.

The requisite documents were lodged with the Companies and Intellectual Property
Commission ("CIPC") on 11 March 2019 and the Company and G5 Construction await
confirmation of filing from the CIPC.

In the light of these decisions, the board of directors of the Company has applied to the JSE
Limited (“JSE”) (and was granted approval by the JSE) for the suspension of trading in the
Company's shares on the JSE with immediate effect in terms of paragraph 1.10 of the Listings
Requirements of the JSE. The board considers this decision to be prudent and in the best
interests of shareholders while the Company and its business rescue practitioners seek pre-
commencement finance to address the financial distress of the Group Five Group and explore
solutions to the current situation facing the Group Five Group. Shareholders are further
advised that there is a slim chance for any realisation of value. However, the board of directors
of Group Five will continue to assess any expressions of interest as communicated previously
to shareholders.

Shareholders will be updated as further material information becomes available and are
advised to exercise caution in relation to the Company.

12 March 2019

Sponsor
Nedbank Corporate and Investment Banking

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