| Fri 21 Nov 2008, 16:20 | | IPL/EQS/ LMID - Imperial/Eqstra/Lereko - Provision of additional acceptable |
|
EQS IPL SIM
EQS IPL LMID
IPL/EQS/ LMID - Imperial/Eqstra/Lereko - Provision of additional acceptable
collateral and withdrawal of cautionary announcement issued by Lereko
Imperial Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 1946/021048/06
JSE share code: IPL
ISIN: ZAE000067211
("Imperial")
Eqstra Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 1998/011672/06
JSE share code: EQS
ISIN: ZAE000117123
("Eqstra")
Lereko Mobility (Proprietary) Limited
(Incorporated in the Republic of South Africa)
Registration number: 2004/034154/07
JSE share code: LMID
ISIN: ZAE0000067229
("Lereko")
PROVISION OF ADDITIONAL ACCEPTABLE COLLATERAL AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT ISSUED BY LEREKO
1. INTRODUCTION
Due to market volatility and the resultant decline in share prices, the
funding structure of the Imperial Black Economic Empowerment ("BEE")
transaction which was entered into between Imperial and Lereko in 2005,
has come close to the share price cover trigger levels contained in the
funding agreements. Hence it has become imperative that steps be taken
to prevent breaching these share price cover trigger levels.
In terms of the original transaction documents, additional acceptable
collateral may be provided in order to prevent the share price cover
triggers being breached. As such it is proposed that subsidiaries of
Imperial and Eqstra issue guarantees or provide cash collateral jointly
(but not severally) for a total amount of R100 million which will count
as additional acceptable collateral.
2. BACKGROUND
2.1 The BEE transaction
Imperial entered into a BEE transaction with Lereko in 2005, whereby
Lereko acquired approximately a 7% equity interest in Imperial
represented by approximately 14.5 million preferred ordinary shares.
In 2010 the preferred ordinary shares will automatically convert into
ordinary shares ("the converted shares").
Lereko funded the acquisition of the preferred ordinary shares through a
combination of:
* equity capital provided by its shareholders;
* raising senior funding through the issue of redeemable preference
shares to Rand Merchant Bank, a division of FirstRand Bank
Limited, and Absa Group Limited;
* mezzanine funding by means of the issue of redeemable debentures
which are listed on the JSE Limited; and
* the provision of notional finance by Imperial.
A portion of the preferred ordinary shares were subscribed for at their
par value of 4 cents each subject to Lereko providing Imperial with a
call option to purchase a formula-determined number of converted
ordinary shares from Lereko in 2015 at their par value of 4 cents each.
The call option was designed to effectively provide Imperial with a
market-related return on the notional finance of R598 million which it
provided for the BEE transaction.
2.2 Listing of Eqstra on the JSE Limited
On 18 April 2008 Imperial shareholders approved the unbundling of
Imperial`s leasing and capital equipment division, Eqstra, subsequent
listing of Eqstra ordinary share capital, the replication of the
Imperial BEE structure in Eqstra and the buy-out of the MCC group of
companies` minority shareholders in exchange for shares in the listed
Eqstra.
In May 2008 Eqstra was unbundled to Imperial shareholders. Imperial
shareholders received ordinary shares in Eqstra on a one-for-one basis
for Imperial ordinary shares held. Eqstra was separately listed on the
JSE Limited on 12 May 2008.
3. SHARE PRICE TRIGGERS
The terms of both the preference shares and the debentures contain
various conditions of default and security which are usual for funding
of this nature. Certain of these events of default are linked to the
combined Imperial and Eqstra share prices and in particular to the
minimum cover level of the underlying security in relation to the
debentures and preference share outstandings.
The minimum share cover ratio in respect of the debenture is 0.75 times,
which as at 20 November 2008 translated into a minimum combined Imperial
and Eqstra share price of approximately R48.39.
The minimum share cover ratio in respect of the preference shares is
200% of the outstanding value of the preference shares, which as at 20
November 2008 translated to a minimum combined Imperial and Eqstra share
price of approximately R41.55.
4. EFFECTS OF BREACHING THE SHARE PRICE COVER TRIGGER
* The debentures and/or the preference shares will immediately become
redeemable.
* The Imperial preferred ordinary shares will convert to Imperial
ordinary shares.
* The Eqstra "B" deferred ordinary shares will convert to Eqstra
ordinary shares.
* It will entitle the preference shareholders and the debenture holders
to dispose of the Imperial ordinary shares and Eqstra ordinary
shares owned by Lereko.
* The board of Lereko will immediately be replaced by appointees of the
funders in order to enable the funders to realise the shares and
settle themselves.
* The Lereko structure would effectively collapse and an additional 14.5
million shares would be issued for effectively no consideration.
* Imperial would lose approximately 7% of its BEE shareholding.
* Eqstra would lose approximately 5% of its BEE shareholding.
5. PROVISION OF ADDITIONAL ACCEPTABLE COLLATERAL
From an Imperial shareholder perspective, there would have been an
awareness from the Circular and Prelisting Statement of May 2005 and
specifically the Documents which lay for inspection, when the approval
of shareholders was sought and granted, that a feature was the
possibility that collateral could be provided by the shareholders of
Lereko, one of which was Imperial.
There are no provisions in the original transaction documents which
record that shareholder approval is required should Imperial elect to
provide collateral. Further, it is not a variation or amendment of the
transaction and, therefore, the original transaction documents require
no variation or amendment.
Imperial Group (Pty) Ltd and Eqstra Corporation (Pty) Ltd subsidiaries
of Imperial and Eqstra respectively are issuing guarantees or will
provide cash collateral jointly (but not severally) for a total amount
of R100 million which will count as additional acceptable collateral (in
the proportions of R78 400 000 by the Imperial subsidiary and R21 600
000 by the Eqstra subsidiary) in favour of the debenture holders and
preference shareholders, which guarantees shall automatically come into
effect on signature date and would expire in September 2010 upon full
settlement of the debenture holders and preference shareholders.
The effect of the additional acceptable collateral will be to reduce the
minimum combined Imperial and Eqstra share prices as mentioned in 3
above to approximately R41.50 in respect of the minimum share cover
ratio of the debentures and R34.66 in respect of the minimum share cover
ratio of the preference shares.
In exchange for the provision of this additional acceptable collateral,
Lereko has agreed that Imperial and Eqstra`s call options over their
shares may be brought forward by 1 (one) year to 2014 at the election of
Imperial and Eqstra, which is subject to shareholder approval.
6 WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The cautionary announcement dated 19 September 2008 issued by Lereko is
hereby withdrawn.
Johannesburg
21 November 2008
Merchant bank, corporate Sponsor to Imperial, Legal adviser to
adviser and transaction Eqstra and Lereko Imperial, Eqstra and
sponsor to Lereko
Imperial, Eqstra and Merrill Lynch South
Lereko Africa (Proprietary) Tugendhaft Wapnick
Limited Banchetti & Partners
Rand Merchant Bank (A
division of FirstRand
Bank Limited)
Date: 21/11/2008 16:20:02 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.
