| Fri 10 Dec 2010, 11:08 | | BFS - Blue - Finalisation of Recapitalisation of Blue changes to the board |
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BFS
BFS
BFS - Blue - Finalisation of Recapitalisation of Blue, changes to the board,
conversion into equity of up to R325m of Debt and Continuation of Cautionary
Announcement
Blue Financial Services Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 1996/006595/06)
JSE Share code: BFS
ISIN: ZAE000083655
("Blue" or the "Company")
Mayibuye Group (Proprietary) Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 1998/022424/07)
("Mayibuye")
FINALISATION OF THE RECAPITALISATION OF BLUE BY MAYIBUYE, CONFIRMATION OF THE
CHANGES TO THE BOARD, PROPOSED CONVERSION INTO EQUITY OF UP TO R325 MILLION OF
DEBT AND CONTINUATION OF CAUTIONARY ANNOUNCEMENT
1 INTRODUCTION
Shareholders are referred to the update announcement released on the
Securities Exchange News Service ("SENS") of the JSE Limited ("JSE") on 30
November 2010 in connection with the proposed recapitalisation of the
Company by Mayibuye ("Recapitalisation Transaction") wherein shareholders
were advised, that the date in the subscription agreement concluded between
the Company and Mayibuye Group ("Subscription Agreement"), by which all
conditions precedent need to be fulfilled or waived (as the case may be)
had been extended to Friday,10 December 2010.
2 FULFILMENT AND OR WAIVER OF ALL REMAINING CONDITIONS TO THE
RECAPITALISATION TRANSACTION
Shareholders are hereby advised that on Thursday, 9 December 2010 all
remaining conditions to the Recapitalisation Transaction were fulfilled or
waived (as the case may be) and with effect from today, 10 December 2010
Mayibuye subscribed for the subscription shares allotted and issued to
Mayibuye in terms of the Subscription Agreement.
3 CONFIRMATION OF CHANGES TO THE BOARD
Shareholders are referred to paragraph 7.7 of the circular to Blue
shareholders dated 7 October 2010 ("Circular"), and to the results of the
annual general meeting of shareholders held on 19 November 2010 ("AGM")
announced on SENS on 19 November 2010, and are hereby advised that with
effect from the 1st business day after the Subscription Agreement becomes
effective, namely 13 December 2010, all the current directors of the board
of Blue have resigned and in terms of resolutions 2.1 to 2.11 that were
proposed at the AGM, the following directors have been appointed to the new
board of Blue: Sipho Twala; Robert Emslie; Timothy Till; Leonard Fine;
James Albert French; Alan Ber; Moss Mashishi, Antonios Couloubis, Johan
Meiring and Shaun Strydom.
4 PROPOSED EARLY CONVERSION
4.1 Background
Shareholders are referred to the update announcement released on SENS on 26
November 2010, wherein it was advised that during the process of obtaining
the approval of the Existing Lenders, of the terms of the convertible loan
agreement ("RenAsset Agreement") entered into between the Company and
Renaissance Africa Master Fund Limited ("RenAsset"), being one of the
Company`s existing lenders, which approval needed to be implemented by all
parties entering into an addendum to the debt rescheduling agreement
("DRA") entered into between certain of the Company`s existing lenders
("Existing Lenders"), the Company, certain of its subsidiaries and
Mayibuye, as detailed in the Circular, certain of the Existing Lenders
engaged Mayibuye and Blue with a view to reaching agreement on the basis on
which the Existing Lenders can convert a portion of the amounts owed to
them into ordinary shares in the Company ("Early Conversion").
4.2 Terms of the Early Conversion
Shareholders are hereby advised that on 9 December 2010 an addendum to the
DRA was concluded between the Existing Lenders, the Company, certain of its
subsidiaries and Mayibuye, whereby, subject to the fulfilment of the
suspensive conditions set out in paragraph 8 of this announcement:
- The date in the DRA by which all conditions to the Subscription
Agreement needed to be fulfilled or waived, was extend to 10 December
2010;
- The Existing Lenders were granted the option to convert a portion, up
to a total aggregate amount of R325 million, of the amounts owing to
them into Blue ordinary shares, at a conversion price of R0.13 per
Ordinary Share. The Existing Lenders must elect by 15 December 2010,
by delivery of a written notice to the Company ("Conversion Notice"),
the amount (if any) which each Existing Lender would like to convert
into Ordinary Shares. If such Conversion Notice is not received by
Blue by 15 December 2010, those Existing Lenders who have not elected
to convert will no longer have the option to convert early in terms of
the Early Conversion;
- The terms of the RenAsset agreement were approved by the Existing
Lenders subject to fulfillment of the key suspsensive conditions set
out in paragraph 7;
- It was agreed that Pinebridge was entitled to participate in the Early
Conversion in accordance with the terms set out in the Updated
Pinebridge Agreement (as defined in paragraph 6).
(collectively "Early Conversion Agreement")
To date the International Finance Corporation has confirmed that it will be
converting the entire amount owing to them of circa R61 million.
4.3 Rationale for the Early Conversion
Notwithstanding the recent Recapitalisation of Blue by Mayibuye, the
Company believes that the Early Conversion will greatly benefit and assist
the Company in implementing its turnaround plan, as it will make available
further cash resources of the Company that would otherwise have been used
to service interest payment due to Existing Lenders and ultimately debt
principal repayments. In addition the Early Conversion will further
strengthen Blue`s balance sheet which should assist the Company in securing
future funding. The Early Conversion further corroborates the Existing
Lenders support and commitment to the turnaround plan to be implemented by
Mayibuye.
5 RENASSET AGREEMENT
As detailed in paragraph 4.1, RenAsset entered into the RenAsset Agreement
with the Company in terms of which RenAsset will have the right, subject to
the fulfilment of certain suspensive conditions detailed in paragraph 8
below, to convert the outstanding debt owed to it by the Company into
Ordinary Shares at a conversion price of R0.13 per Ordinary Share.
RenAsset is required to initially convert a minimum of 50% of the total
outstanding debt owed to it of circa R47 million, and thereafter the
remaining amount owed to may be converted from time to time but in any
event prior to the third anniversary of the signature date of the RenAsset
Agreement, at a conversion price equal to the 30 day Volume Weighted
Average Price on such date RenAsset elects to convert ("Long Stop date").
In respect of any remaining portion of such outstanding debt owed to
RenAsset by the Company on the Long Stop Date, RenAsset shall be treated on
the same terms as the unsecured lenders who are party to the DRA. To date
RenAsset has confirmed that it will be converting the entire amount owing
to them in support of the turnaround plan to be implemented by Mayibuye.
6 UPDATED PINEBRDGE AGREEMENT
Shareholders are referred to the update announcement issued on SENS on 27
October 2010, whereby Blue shareholders where advised that an agreement
dated 27 October 2010 ("Updated Pinebridge Agreement") was entered into
between Mayibuye, Pinebridge, Blue and certain Group Companies which, inter
alia:
- revived the Pinebridge Agreement; and
- excluded certain additional claims held by Pinebridge against Blue and
certain Group Companies from the claims acquired by Mayibuye from
Pinebridge in terms of the Pinebridge Agreement ("Additional Excluded
Claims")
In light of the above, Mayibuye and Pinebridge agreed inter alia to exclude
the Additional Excluded Claims from the Sale Rights contained in the
Pinebridge Agreement.
7 ANTI-DILUTION SHARES
In terms of a resolution passed at the shareholders meeting held on 29
October 2010, shareholders approved the issue of anti-dilution shares to
Mayibuye in the event that any new Ordinary Shares are issued to the
Existing Lenders, or to any other person or entity in respect of any debt
obligation of whatsoever nature owed by Blue to any such person or entity,
up to including the date of Subscription and as a result of such issue of
new Ordinary Shares, Mayibuye`s holding in Blue falls below 51% of the
total issued share capital of the Company. Accordingly as a result of the
issue of new Ordinary Shares that will occur on the implementation of the
Early Conversion Agreement, RenAsset Agreement and the Updated Pinebridge
Agreement, Mayibuye will have the right to subscribe for such number of
additional Ordinary Shares, at par value, which will result in Mayibuye
holding not less than 51% of the total issued share capital of the Company
on a fully diluted basis.
8 SUSPENSIVE CONDITIONS
The Early Conversion Agreement and the RenAsset Agreement are all
conditional upon the Company obtaining the necessary regulatory and
shareholder approvals before 28 February 2011. With respect to the Updated
Pinebridge Agreement, the settlement of the Additional Excluded Claims by
way of the allotment and issue of Ordinary Shares is conditional on
shareholder approval, however if all regulatory and shareholder approvals
are not obtained, the Additional Excluded Claims will be settled in cash on
the same basis as the unsecured lenders in terms of the DRA.
9 INDEPENDENT ADVICE
At the time the Updated Pinebridge Agreement was concluded, Pinebridge held
in excess of 10% of the Ordinary Shares and is thus considered to be a
related party in terms of section 10 of the JSE Listings Requirements.
Accordingly the board of Blue may be required to obtain independent advice
as to whether the specific issue of shares to Pinebridge envisaged in terms
of the Updated Pinebridge Agreement is fair.
10 FINANCIAL EFFECTS
As the Existing Lenders have until 15 December 2010 to elect whether or not
they wish to convert a portion of the outstanding debt owed to them, the
financial effects of the Early Conversion Agreement, the RenAsset Agreement
and the Updated Pinebridge agreement cannot be determined at this stage.
11 WITHDRAWAL OF CAUTIONARY RELATING TO THE RECAPITALISATION
In the update announcement released on SENS on 30 November 2010,
shareholders were advised to exercise caution in dealing with their Blue
securities in respect of the Recapitalisation. As all the conditions
relating to the Recapitalisation have been fulfilled and subscription has
occurred, shareholders are no longer required to exercise caution in
dealing in their Blue securities in relation to the Recapitalisation.
12 CONTINUATION OF CAUTIONARY ANNOUNCEMENT RELATING TO THE EARLY CONVERSION
As the financial effects relating the Early Conversion, RenAsset Agreement
and the updated Pinebridge Agreement have not yet been determined,
shareholders are advised to continue to exercise caution when dealing in
their Blue securities until a further announcement regarding the financial
effects is made.
13 UPDATE ANNOUNCEMENT TO SHAREHOLDERS
A further announcement to Blue shareholders will be made in due course on
SENS, advising shareholders of which of the Existing Lenders have elected
to convert and the amount to be converted.
14 CIRCULAR TO SHAREHOLDERS
On the basis that all necessary conditions are fulfilled the Early
Conversion Agreement, RenAsset Agreement and Updated Pinebridge Agreement
will be implemented via a specific issue of shares to the relevant parties
which requires the approval of shareholders present in person or by proxy
holding in excess of 75% of the issued shares of the Company. A circular
to shareholders convening a general meeting to approve all resolutions
necessary to implement the above mentioned agreements will be posted to
shareholders in due course.
Pretoria
10 December 2010
Financial adviser to Blue in relation the Recapitalisation
NM Rothschild & Sons (South Africa) (Proprietary) Limited
Designated adviser to Blue
Grindrod Bank Limited
Financial adviser to Mayibuye in relation to the Recapitalisation and Early
Conversion
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited
Legal adviser to Mayibuye in relation to the Recapitalisation and Early
Conversion
Cliffe Dekker Hofmeyr Inc
Date: 10/12/2010 11:08:02 Produced by the JSE SENS Department.
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