| Fri 26 Feb 2010, 9:29 | | SKY - Sea Kay - Legal Actions Taken By The National Housing Finance Corporation |
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SKY
SKY
SKY - Sea Kay - Legal Actions Taken By The National Housing Finance Corporation
Limited ("NHFC") Against Sea Kay
SEA KAY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2006/004967/06)
JSE code: SKY
ISIN: ZAE000102380
("Sea Kay" or the "company")
LEGAL ACTIONS TAKEN BY THE NATIONAL HOUSING FINANCE CORPORATION LIMITED ("NHFC")
AGAINST SEA KAY
Shareholders are advised that the NHFC has served applications for liquidation
on both Sea Kay, and Sea Kay Engineering Services (Pty) Limited ("Sea Kay
Engineering"), a wholly owned subsidiary of Sea Kay. Both applications relate to
the loan agreement between the NHFC and Sea Kay Engineering which resulted in a
loan of R128 million by the NHFC to Sea Kay Engineering, which loan currently
has an outstanding balance of R108 million and for which obligation Sea Kay
signed surety. To date Sea Kay has re-paid an amount of R56 million, including
interest, to the NHFC on the said loan.
The NHFC is a housing financing arm of the Department of Human Settlements. It
is therefore a Government organisation that provides funding to companies such
as Sea Kay to deliver on Government housing contracts and is mandated
specifically to improve housing delivery according to the Government`s housing
policy, through the provision of bridging finance.
The board has decided that the action will be defended by the company and the
relevant notice will be filed at the High Court of Johannesburg in due course.
The directors have received legal advice that the actions instituted by the NHFC
are factually and legally flawed and that the company has a reasonable prospect
of successfully defending both applications.
The company`s legal team has advised the company to consider a counterclaim
against the NHFC for a breach of the provisions of the loan agreement of which
the NHFC were notified, in writing, by Sea Kay during 2009, but to which
notification Sea Kay never received any response.
The NHFC also delivered a copy of both applications to the offices of the
Gauteng Department of Housing ("GDH") without the consent or knowledge of Sea
Kay.
The board wishes to advise shareholders that Government, through the 16
contracts concluded with Sea Kay, owes the company more than the alleged NHFC
liability.
Government has presented Sea Kay with numerous awards during the past ten years
for excellent quality construction. Sea Kay is the biggest single entity
delivering housing products nationally within the National Department of Human
Settlement`s housing programme and is currently delivering in excess of 12,000
RDP/BNG houses with a value of R600 million.
The office of the Minister of Human Settlements has endeavored to assist Sea Kay
to engage with the NHFC to discuss commercial solutions to resolving certain
bona fide disputes relating to the interpretation of the loan agreement.
The applications were, however, served without any notification to Sea Kay or
any reference to the office of the Minister of Human Settlements.
The directors wish to state categorically that Sea Kay`s expressed intentions to
continue and improve on the partnership with Government in order to ensure
effective, efficient, speedy and quality low-cost housing delivery in the
country, still remains a top priority of the company.
In this regard the company has made substantial progress to resolve the dispute
with Government on the N2 Gateway project in the Western Cape. Settlement
proposals have recently been negotiated in good faith (in stark contrast with
the attitude adopted by the NHFC through the legal actions taken by them). A
speedy solution to the dispute in the Western Cape is expected, which will
result not only in the continuation of the contractual and settlement payments,
but also in the completion of current projects and further progress on
Government`s N2 Gateway pilot project.
In Gauteng, the GDH and Sea Kay have a solid working relationship of more than
10 years. During this long-standing relationship the GDH has never declined to
pay Sea Kay any amount due. Although there have been differences regarding the
processing of payment certificates recently, the GDH has not stopped any
payments to Sea Kay where the payment certificates were appropriately processed,
and no threats of legal action have been made by either the GDH or Sea Kay.
Negotiations between the company and the GDH to improve the GDH`s rate of
payment processing in order to expedite payments to Sea Kay are underway. The
board is confident that these discussions and negotiations will result in the
company`s debtor days decreasing during the next few weeks, to the extent that
the company will complete all current contracts within the timeframes set out in
the delivery programme.
Neither the board nor the GDH (as far as the board could establish) intended to
address any problems or negotiations in public, but rather to continue with the
delivery of much needed subsidised housing for the poor.
Unfortunately, the action adopted by the NHFC leaves the company no option other
than to deal with that dispute publicly; and in so doing, unnecessarily
implicate the GDH.
The company has indicated to the NHFC that it remains open for discussion to
resolve the issues in a commercially sensible way and in the interests of
housing delivery in South Africa, should the NHFC elect to do so.
The board is positive that these matters can be resolved, which will allow Sea
Kay to continue to deliver on all its housing contracts and projects.
A further announcement in this regard will be made as soon substantial progress
in this matter has been made.
Johannesburg
26 February 2010
Sponsor
Vunani Corporate Finance
Date: 26/02/2010 09:29:02 Produced by the JSE SENS Department.
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