| Thu 16 Apr 2009, 14:23 | | FRT - Faritec Holdings Limited - Working Capital Facility Specific Issue |
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FRT
FRT
FRT - Faritec Holdings Limited - Working Capital Facility, Specific Issue,
Revised Terms of Rights Offer and Cautionary Announcement
Faritec Holdings Limited
(Registration number 1998/004872/06)
Share code: FRT
ISIN: ZAE000016838
("Faritec" or the "company")
WORKING CAPITAL FACILITY, SPECIFIC ISSUE, REVISED TERMS OF RIGHTS OFFER AND
CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Shareholders are referred to the cautionary announcement dated 6 April 2009
advising them that Faritec was in the process of securing an urgent working
capital facility.
Faritec was not able to conclude an agreement with the parties in question, but
has concluded agreements with Shoden Data Systems (Pty) Ltd ("Shoden"), an
unrelated third party, in terms of which Shoden will advance a loan of R29
million to fund the company`s working capital shortfall ("the facility"). The
facility will, subject to the necessary shareholder and regulatory approvals,
convert to equity on the basis set out in this announcement. The conversion of
the facility to equity will result in Shoden acquiring a controlling interest in
Faritec.
As a result of the terms of the facility, the board of directors of Faritec has
resolved to amend the terms of the rights offer announced on 10 March 2009 ("the
rights offer") to ensure consistency in the transactions. In addition, Jay &
Jayendra (Pty) Ltd ("J&J"), one of the underwriters of the rights offer, has
agreed to advance a R5 million bridging loan to Faritec, increasing the
immediate capital injection into Faritec to R34 million, enabling Faritec to
generate positive cash flows going forward.
RATIONALE
Faritec posted a loss for the six months ended 31 December 2008, prompting the
immediate implementation of a turn-around strategy to address the company`s
performance, which included a targeted reduction in operating expenditure, staff
retrenchments and the raising of additional working capital through the rights
offer.
As part of its turn-around strategy, Faritec raised a R15 million bridging loan
in the context of the rights offer in order to fund working capital requirements
(with a further R5 million payable on the implementation of the rights offer).
In the intervening period, a number of factors contributed to a cashflow crisis
in the business. These included the costs of the turn-around strategy, the
prevailing difficult credit environment and a cash lock-up precipitated by
Faritec`s obligations to meet its financial covenants.
In this context, the board engaged with a number of different parties with a
view to securing a facility necessary to ensure the sustainability of Faritec as
a going concern.
The conclusion of the facility with Shoden, together with the loan provided by
J&J, achieves this objective by immediately injecting sufficient capital into
Faritec to enable it to meet its working capital requirements to the benefit of
shareholders, customers, creditors and employees.
After the conversion of the facility into equity, Faritec will retain strong BEE
credentials and will have a strong controlling shareholder committed to working
together with management and the board to enhance value for all shareholders.
TERMS AND CONDITIONS OF THE FACILITY
Shoden will advance R29 million in cash to Faritec on or before 17 April 2009.
Save as set out below the facility will not bear interest.
Subject to the necessary shareholder and regulatory approvals including:
- the approvals necessary to increase the authorised and unissued share
capital of Faritec and the approval required in terms of the JSE Listings
Requirements; and
- the approval of the South African competition authorities,
collectively (the "conditions"), the facility will be repaid by the issue and
allotment of R29 million worth of Faritec shares (the "repayment shares") at an
issue price of three cents per share.
Should Faritec fail, for any reason, to allot and issue the repayment shares
(including because any of the conditions is not fulfilled) then Shoden shall be
entitled to repayment of the facility and the payment of an additional financing
return equivalent to a further R29 million, together with penalty interest
thereon at a rate of prime plus 10% if, for any reason, such amount is not paid
in cash on the date on which the condition in question fails.
The facility is secured by the cession of the unencumbered claims against
debtors of Faritec as well as its current and future intellectual property
rights.
WAIVER OF THE MANDATORY OFFER
The conversion of the facility by the issue of the repayment shares will trigger
a mandatory offer to Faritec shareholders, in terms of the Securities Regulation
Code on Takeovers and Mergers (the "SRP Code"), unless the waiver of this
requirement is approved by a majority of the votes of Faritec shareholders other
than Shoden at a meeting called for these purposes and the Securities Regulation
Panel dispenses with this requirement in terms of rule 8.7 of the SRP Code.
Full details of the application for a waiver of the mandatory offer will be set
out in the circular referred to below.
REVISED TERMS AND CONDITIONS OF THE RIGHTS OFFER
As a result of the terms of the facility, the board of directors of Faritec have
resolved to amend to the terms of the rights offer as follows:
- the initial terms of the rights offer envisaged Faritec raising R20 million
through the issue of 200 million new shares at an issue price of 10 cents
per share in the ratio of 77.46 shares for every 100 shares held by Faritec
shareholders on the record date for participation in the rights offer;
- Faritec will now raise R20 million through the issue of 666 666 667 new
shares at an issue price of 3 cents per share in the ratio of 258.20 shares
for every 100 shares held by Faritec shareholders on the record date for
participation in the rights offer;
- as a result of the increased number of rights offer shares, the rights
offer will now be conditional on the approvals necessary to increase the
authorised and unissued share capital of Faritec;
- J&J have agreed to advance a R5 million bridging loan to Faritec on the
same terms as the R15 million bridging loans advanced by the other
underwriters of the rights offer.
Save as set out above, the remaining terms of the rights offer (including, in
particular the terms of the underwriting of the rights offer) remain the same as
those announced on 10 March 2009. Shoden will not participate in the rights
offer.
FURTHER DOCUMENTATION AND RENEWAL OF CAUTIONARY
The financial effects of the issue of the repayment shares and rights offer will
be published in due course and shareholders are advised to exercise caution when
trading in Faritec shares until the publication of a further announcement.
Circulars in relation to the issue of the repayment shares and the rights offer
are in the process of being prepared and will be posted to shareholders in due
course.
16 April 2009
Sponsor
Java Capital (Proprietary) Limited
www.faritec.com
Date: 16/04/2009 14:23:01 Produced by the JSE SENS Department.
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