| Thu 10 Feb 2011, 17:43 | | BFS - Blue - Proposed Blue BEE Transaction Publication of Financial Effects |
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BFS
BFS
BFS - Blue - Proposed Blue BEE Transaction, Publication of Financial Effects
and Posting of Circular and Notice of General Meeting and Withdrawal 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")
ANNOUNCEMENT OF PROPOSED BLUE BEE TRANSACTION, PUBLICATION OF FINANCIAL
EFFECTS AND POSTING OF CIRCULAR AND NOTICE OF GENERAL MEETING RELATING TO
THE EARLY CONVERSION AND BLUE BEE TRANSACTION, AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
INTRODUCTION
1.1 The purpose of this announcement is to advise Blue shareholders,
inter alia, of the following:
1.1.1 the proposed R50 million Blue BEE Transaction, as set out in
Paragraph 2;
1.1.2 the publication of the pro forma financial effects of the
previously announced Early Conversion, RenAsset Conversion,
Pinebridge Specific Issue, together with the pro forma financial
effects of the Blue BEE Transaction, as set out in Paragraph 3;
and
1.1.3 the posting of the circular and notice of general meeting to Blue
shareholders, containing details of the Early Conversion, RenAsset
Conversion, Pinebridge Specific Issue and the Blue BEE
Transaction, as set out in Paragraph 5.
1.2 Shareholders are referred to the update announcement released on
the Securities Exchange News Service ("SENS") of the JSE Limited
("JSE") on 10 December 2010 ("10 December 2010 announcement")
wherein shareholders were advised, inter alia, of the proposed,
early conversion of debt into equity ("Early Conversion") up to a
maximum aggregate amount of R325 million ("Conversion Limit") at a
conversion price of 13 cents per Blue ordinary share ("Ordinary
Share"). In the 10 December 2010 announcement, shareholders were
further advised that the following would form part of the overall
Early Conversion, namely:
1.2.1 the proposed conversion of circa. R44.4 million of debt into
Ordinary shares, at a conversion price of 13 cents per Ordinary
Share ("RenAsset Conversion") in terms of the convertible loan
agreement entered into between the Company and Renaissance Africa
Master Fund Limited ("RenAsset"); and
1.2.2 the proposed conversion of circa. R43.9 million into Ordinary
Shares at a conversion price of 13 cents per Ordinary Share, in
order to discharge Blue`s obligation in connection with the Blue
Nigeria Claim being an amount of R40.9 million and the Blue Claim
being an amount of R2.9 million, in terms of the Pinebridge
amendment agreement ("Pinebridge Amendment Agreement") entered
into between Mayibuye Group (Proprietary) Limited ("Mayibuye",
Pinebridge Global Emerging Markets Partners II, L.P
("Pinebridge"), Blue and certain Blue subsidiaries ("Pinebridge
Specific Issue").
1.3 Shareholders are further referred to the update announcement released
on SENS on 21 January 2011 ("21 January 2011 announcement") wherein
shareholders were advised, inter alia, of the subsequent confirmations
received from certain of Blue`s existing lenders ("Existing Lenders")
who had signed the debt rescheduling agreement ("DRA") and the early
conversion agreement ("Early Conversion Agreement"), RenAsset and
Pinebridge, advising Blue that they would convert up to R266 million of
the existing debt and/or obligations owing by Blue, in terms of the
Early Conversion.
1.4 The Early Conversion, RenAsset Conversion, Pinebridge Specific Issue
and the Blue BEE Transaction are collectively referred to in this
announcement as the "Transaction").
2 PROPOSED BEE TRANSACTION BY BLUE
2.1 Background
The board of Blue ("Board") would like to propose a BEE transaction to
be implemented by Blue ("Blue BEE Transaction"), in terms of which,
inter alia, certain third party investors ("QBI`s") who qualify in
terms of the criteria ("BEE Criteria") which need to be met by those
entities or individuals in order to be awarded a pre-defined BEE status
or level as contemplated in the Black Economic Empowerment Act, 2003
(Act 53 of 2003), of South Africa ("BEE Act") and those Blue employees
("QBE`s") who qualify in terms of BEE criteria will, from time to time
be afforded the opportunity to acquire Ordinary Shares from an
independent trust to be established in order to implement the Blue BEE
Transaction ("Blue BEE Trust").
2.2 Rationale
One of the provisions contained in the Pinebridge Amendment Agreement
is that any Early Conversion undertaken by Blue is capped at R325
million. In terms of the confirmations received from those Existing
Lenders who elected to participate in the Early Conversion ("Converting
Lenders"), RenAsset and Pinebridge, the total expected debt and/or
obligation to be converted into Ordinary Shares amounts to circa. R266
million.
As there is potentially circa. R59 million of headroom between the
Conversion Limit of R325 million and the amount that is expected to be
converted (R266 million), it is proposed that the Blue BEE Trust be
established in order to sell Ordinary Shares for cash to those BEE
parties, who qualify in terms of the relevant BEE Criteria and who on
acquisition of the Ordinary Shares will become direct shareholders of
Blue.
The Company`s objective in the medium term is to raise Blue`s BEE
rating to a Level 3 of which BEE equity ownership will comprise a key
element. Accordingly, the Company is of the view that the proposed
Blue BEE Transaction will greatly benefit Blue as it will significantly
improve the BEE status of the Company and reinforce Blue`s stated
commitment to transformation. Furthermore it will also assist the
Company in the implementation of its turnaround strategy which involves
inter alia, improving the financial strength of its balance sheet
pursuant to the implementation of the debt equity conversion proposed
in terms of the Blue BEE Transaction.
2.3 Salient features of the Blue BEE Transaction structure
The overarching principle underpinning the proposed Blue BEE
Transaction is that an independent trust will seek to acquire the
existing debt obligations of the Company from existing lenders or
creditors and convert these into Ordinary Shares, at a conversion price
of 13 cents per Ordinary Share. These Ordinary Shares will subsequently
be sold to BEE investors and Blue employees that meet BEE criteria as
contemplated in the BEE Act.
The salient features of the Blue BEE Transaction structure are
2.3.1 The Blue BEE Trust will acquire, in terms of option agreements
("Blue BEE Option Agreements") to be entered into between the Blue
BEE Trust and certain of the Selling Lenders (as defined below),
such amounts owed by Blue and its subsidiary companies ("BEE
Transaction Debts") to any of the Existing Lenders who have
elected not to convert the entire amount owing to them into
Ordinary Shares in terms of the Early Conversion, those lenders
who elected not to participate in the DRA and any other creditor
of the Group (collectively the "Selling Lenders"). The amount of
the Blue BEE Transaction Debts, which the Blue BEE Trust can
acquire from the Selling Lenders is capped at an aggregate maximum
amount of R50 million.
2.3.2 Neither Blue nor Mayibuye will provide funding or guarantees to
the Blue BEE Trust for purposes of acquiring the Blue BEE
Transaction Debts.
2.3.3 Blue will subsequently grant the option to the Blue BEE Trust to
convert the Blue BEE Transaction Debts acquired in terms of the
Blue BEE Option Agreements into Ordinary Shares at 13 cents per
Ordinary Share.
2.3.4 The BEE parties that will be entitled to acquire the Ordinary
Shares from the Blue BEE Trust will collectively comprise certain
QBI`s and QBE`s who on acquisition of the Ordinary Shares will
become direct shareholders of Blue and will rank pari passu with
all other shareholders (in particular there will be no
restrictions placed on these BEE parties in connection with their
ability to sell or transfer the Ordinary Shares owned by these BEE
parties).
2.3.5 Only those QBI`s and QBE`s that are not a related party, as
defined in the JSE Listings Requirements ("Listings
Requirements"), to Blue or Mayibuye will be entitled to acquire
the Ordinary Shares from the Blue BEE Trust.
2.3.6 Neither Blue nor Mayibuye will provide funding or guarantees to
any QBI`s or QBE`s for purposes of acquiring the Ordinary Shares
from the Blue BEE Trust.
2.3.7 It is proposed that the allocation of Ordinary Shares that may be
sold by the Blue BEE Trust to the BEE parties mentioned in
paragraphs 2.3.4 above will be allocated in the following
proportions:
QBI`s 70%
QBE`s 30%
2.3.8 Post the implementation of the proposed Blue BEE Transaction,
whereby Ordinary Shares will be sold to QBI`s and QBE`s, the Blue
BEE Trust will not own for the benefit of Blue or Mayibuye, any
Ordinary Shares that will be issued pursuant to the conversion of
the Blue BEE Transaction Debts into Ordinary Shares.
2.4 Salient features of the Blue BEE Trust
2.4.1 The Blue BEE Trust will be established as a discretionary trust to
specifically implement the Blue BEE Transaction which has been
proposed for the benefit of those QBI`s and QBE`s who elect to
participate. The aggregate maximum amount of Blue BEE Transaction
Debts acquired by the Blue BEE Trust cannot exceed R50 million.
2.4.2 The Blue BEE Trust will be independently administered by GMG Trust
Company (SA) (Proprietary) Limited, a privately owned trust and
corporate services company incorporated in South Africa ("GMG"),
in its capacity as trustee of the Blue BEE Trust. Whilst the
overriding principle governing the Blue BEE Trust is that it will
implement the Blue BEE Transaction for the primary benefit of the
QBI`s and QBE`s, to the extent that there are any residual funds
of an immaterial amount that remain in the Blue BEE Trust post the
implementation of the Blue BEE Transaction, the Trustees may elect
to allocate these to Blue as the sole, legal beneficiary of the
Blue BEE Trust.
2.4.3 Initially the Blue BEE Trust shall have not less than one trustee
in office. In the event that the trustee resigns, the Board of
Blue is entitled to appoint five natural persons as trustees,
provided that at least:
a three of the newly appointed trustees are black people; and
two of the newly appointed trustees are not employed by any
member of the Group;
b thereafter the Blue BEE Trust shall have not less than five
trustees in office at any time.
2.4.4 The establishment of the Blue BEE Trust is irrevocable and shall
endure until it is terminated by means of a unanimous resolution
of the trustees. On termination of the Blue BEE Trust, all the
assets of the Blue BEE Trust will be realised and all liabilities
be paid. Any remaining proceeds of the sale of the assets shall
be paid to Blue, the sole beneficiary of the Blue BEE Trust.
2.4.5 Shareholders will be requested to approve a specific authority to
issue up to 384,615,384 Ordinary Shares for cash at 13 cents per
Ordinary Share to the Blue BEE Trust, pursuant to the
implementation of the Blue BEE Transaction. It is proposed that
such specific authority will remain in place for a period of up to
15 months from the date that shareholders approve such authority
in a general meeting.
2.4.6 The trustees of the Blue BEE Trust may, inter alia, only acquire
or hold the following assets in the name of the Blue BEE Trust:
A Ordinary Shares;
B Blue BEE Transaction Debts as described in paragraph 2.3.1
above;
C Ordinary Shares which are obtained by converting the Blue BEE
Transaction Debts into Ordinary Shares at a conversion price
of 13 cents per Ordinary Share; and
D the proceeds of the sale of the Ordinary Shares which are
obtained by the Blue BEE Trust as a result of converting the
Blue BEE Transaction Debts into Ordinary Shares.
2.4.7 All resolutions of the trustees shall be adopted by a majority
vote and each trustee shall be entitled to cast one vote. The
quorum required for any meeting of the trustees shall be a
majority of the number of trustees then in office.
2.4.8 The Blue BEE Trust will be a discretionary trust and Blue, as the
sole beneficiary, will benefit to the extent, if any, of any
distributions made to Blue in the discretion of the trustees.
2.5 Potential adjustment to the maximum permissible amount of R50
million
2.5.1 Of the total known amount that is proposed will be converted,
namely circa. R266 million, there is R85.4 million of debt which
is US dollar ("US$") denominated, and a further R36.7 million of
debt that is Botswana Pula ("BWP") denominated. The actual amount
that will be converted into Ordinary Shares will be calculated by
using the Ruling Spot Rate (US$ and BWP) on the day that a
conversion notice is issued by Blue to each of the Converting
Lenders, RenAsset and Pinebridge, as the case may be, which
conversion notice will only be issued once all shareholder and
regulatory approvals have been obtained.
2.5.2 In order to cater for the possible weakening in the exchange rates
between ZAR and US$ and ZAR and BWP, the Blue BEE Trust Deed
provides for the maximum permissible amount of R50 million to be
reduced by such actual amounts that are required to be paid to the
Converting Lenders, RenAsset and Pinebridge as is required to
implement the Early Conversion, RenAsset Conversion and the
Pinebridge Specific Issue. Should the relevant currencies
fluctuate and result in the aggregate debt to be converted in
terms of the Early Conversion, RenAsset Conversion and the
Pinebridge Specific Issue such that the aggregate debt to be
converted exceed an amount of R266 million, there is additional
head room of R9 million available before the amount which the Blue
BEE Trust is entitled to convert will be reduced by the amount
which exceeds R275 million.
3 FINANCIAL EFFECTS
Shareholders are referred to the 10 December 2010 announcement
wherein inter alia, it was stated that the pro forma financial
effects of the Early Conversion, RenAsset Conversion and
Pinebridge Specific Issue could not be determined at the time.
Subsequent to the 10 December 2010 announcement, the pro forma
financial effects of inter alia the Early Conversion, the RenAsset
Conversion, the Pinebridge Specific Issue and the consequent issue
of Anti-dilution Shares to Mayibuye, have been determined and are
set out in Paragraph 3.1.
The pro forma financial effects of the Blue BEE Transaction, the
potential issue of further Dilution and Anti-dilution Shares as
well as the potential issue of Warranty Shares are set out in
Paragraphs 3.2 to 3.4.
Shareholders are advised to read the pro forma financial effects
set out in Paragraphs 3.1 to 3.4 in conjunction with the 10
December 2010 announcement as well as any other update
announcements released on SENS that are specifically referred to
in the 10 December 2010 announcement.
It should be noted that for purposes of preparing the pro forma
financial effects set out below, references to "Recapitalisation"
refers to the recapitalisation of the Company through the
injection of R163 million of equity capital by Mayibuye in terms
of the subscription agreement concluded in 2010 ("Subscription
Agreement"), the provision of up to R300 million in capital
payments to be received by Blue and its subsidiary companies (as
consideration for the sale of any claims by Blue and its
subsidiary companies) in terms of the claims purchase agreement
concluded in 2010 ("Claims Purchase Agreement") and the
implementation of the DRA and Pinebridge Agreement (read with the
Pinebridge Amendment Agreement). References to "Recapitalisation
Circular" refer to the circular to Blue shareholders dated 7
October 2010;
3.1 Unaudited pro forma financial effects
The table below illustrates the unaudited pro forma financial effects
of the Recapitalisation, Blue Nigeria Claim, the Early Conversion, the
RenAsset Conversion and the Pinebridge Specific Issue on the published
reviewed condensed consolidated interim results of the Company for the
6 months ended 31 August 2010.
The preparation of the unaudited pro forma financial effects is the
responsibility of the Directors of Blue. The unaudited pro forma
financial effects have been prepared for illustrative purposes only to
provide information on how the Recapitalisation, Blue Nigeria Claim and
the Early Conversion, the RenAsset Conversion and the Pinebridge
Specific Issue might have impacted on the financial position and
results of the Company and, due to the nature thereof, may not be a
fair reflection of the Company`s financial position, nor of its future
results, after the Recapitalisation, Blue Nigeria Claim and the Early
Conversion, the RenAsset Conversion and the Pinebridge Specific Issue.
It should be noted that for purposes of preparing the pro forma
financial effects set out in paragraphs 3.1 to 3.4, the issue price of
13 cents per Ordinary Share at which the Ordinary Shares are to be
issued in terms of the Early Conversion Agreement, the RenAsset
Agreement, the Pinebridge Amendment Agreement and the Blue BEE Trust
Deed is assumed to be the fair value of the Ordinary Shares for
accounting purposes. For avoidance of doubt the potential issue of
Warranty Shares to Mayibuye arising from the Blue Nigeria Claim, the
impact of the BEE Transaction and any consequent issue of Anti-dilution
Shares to Mayibuye is not set out in the table below.
Unaudited pro forma financial effects
Before After % After % After the %
(2) Recapita- change the change Early change
(cents) lisation Early Conversio
and Blue Conversi n,
Nigeria on and RenAsset
Claim(3) the Conversio
(cents) RenAsset n and
Conversi Pinebridg
on (6) e
(cents) Specific
Issue (9)
(cents)
Loss per (25.3) (9.7) 61.7% (3.6) 62.9% (3.1) 13.9%
share
("LPS")
(4)(7)(10)
Headline (24.9) (9.6) 61.4% (3.5) 63.5% (3.1) 11.4%
loss per
share
("HLPS")
(4)(7)(10)
Net asset (33.0) (5.5) 83.3% 2.4 143.6% 2.8 16.7%
value per
share
("NAVPS")
(5)(8)(11)
Net tangible (112.0) (31.8) 71.6% (7.5) 76.4% (5.9) 21.3%
asset value
per share
("NTAVPS")
(5)(8)(11)
Number of 624,370 1,878,216 200.8% 4,973,65 164.8% 5,663,314 13.9%
shares in 1
issue (`000)
(4)(5)(7)(8)
(10)(11)
Weighted 624,370 1,878,216 200.8% 4,973,65 164.8% 5,663,314 13.9%
average 1
number of
shares
(`000)
(4)(5)(7)(8)
(10)(11)
Notes:
1 The unaudited pro forma financial effects are based on the accounting
policies adopted by the Company and are in accordance with IFRS.
2 The `Before` column is based on the published reviewed condensed
consolidated interim results for the 6 months ended 31 August 2010.
Recapitalisation and Blue Nigeria Claim
3 The `After Recapitalisation and Blue Nigeria Claim` column (on which
pro forma financial effects have been provided previously) has been
adjusted for the financial effects of the Recapitalisation as
previously presented in the Recapitalisation Circular. It also includes
adjustments relating to the recognition of the Blue Nigeria Claim. The
following adjustments are made or have been considered:
4 For purposes of calculating LPS and HLPS (After Recapitalisation and
Blue Nigeria Claim), the unaudited pro forma financial effects are
calculated on the following assumptions:
(a) The Recapitalisation resulting in the issue of 1,253,846,154
Ordinary Shares was implemented on 1 March 2010 and the cash
portion (R150 million) of the aggregate subscription consideration
being R163 million (" Aggregate Subscription Consideration") was
made available to Blue on 1 March 2010;
(b) Once-off transaction, implementation and restructuring costs of
R10 million (pre-tax) in aggregate are assumed to be settled from
the cash portion of the Aggregate Subscription Consideration, and
are assumed to be tax deductible;
( c) The non-recurring expense of R13 million relating to the
settlement of the amount owing to Pinebridge in terms of the
Pinebridge Agreement ("Pinebridge Settlement Amount") has been
recognised in the statement of comprehensive income, but this
expense is assumed to be non tax deductible;
(d) No income has been assumed to be generated from the balance of
R140 million from the Aggregate Subscription Consideration as to
do so would be inconsistent with the Listings Requirements which
do not permit pro forma adjustments relating to future events or
decisions. The Company, however intends to deploy the R140 million
balance of the cash proceeds received from the Aggregate
Subscription Consideration to generate a new book of loans and
advances to customers and therefore generate earnings for the
Group based on targeted earnings yields;
(e) No effect of the DRA has been recognised as no significant capital
repayments, which would have to be rescheduled to 31 August 2010,
were made to Existing Lenders during 1 March 2010 to 31 August
2010;
(f) The Claims Purchase Agreement is accounted for as follows:
I A facility will be made available to Blue whereby Claims which at
any point may not exceed R300 million will be sold to Leonox. It
is assumed that R100 million of Claims were sold to Leonox during
1 March 2010 and 31 August 2010;
II An implied cost of funding of 5% above the then prevailing Prime
Lending Rate is assumed to be incurred. This implied cost of
funding is recognised for the period from 1 March 2010 to 31
August 2010. The total cost of funding recognised for the 6 months
is circa. R3.4 million (pre-tax); and
III No income has been assumed from the deployment of the net cash
made available to Blue to generate new loan advances to customers,
as to do so would be inconsistent with the Listings Requirements
which do not permit pro forma adjustments that are not factually
supportable or are based on future events or decisions. However,
the Company will utilise the facility made available in terms of
the Claims Purchase Agreement to generate a new book of loans and
advances to customers and therefore generate earnings for the
Group based on targeted earnings yields.
(g) A full tax rate of 28% has been applied and the impact of any tax
losses is ignored. All interest expenses incurred are assumed to
be tax deductible;
(h) An adjustment of circa. R2.3 million to non-controlling interest
i.r.o. additional losses arising due to the additional 10%
shareholding in Blue Nigeria as a result of the Blue Nigeria Claim
as discussed in Paragraph 1.2.2 of this announcement. It is
assumed that the Blue Nigeria Claim was effective 1 March 2010;
and
(i) No value has been attributed to any cost savings or cost synergies
expected from Mayibuye`s participation in Blue`s operations.
5 For purposes of calculating NAVPS and NTAVPS (After Recapitalisation
and Blue Nigeria Claim), the unaudited pro forma financial effects are
calculated on the following assumptions:
(a) The Recapitalisation was implemented on 31 August 2010;
(b) The issue of 1,253,846,154 Ordinary Shares for an Aggregate
Subscription Consideration of R163 million which has been added to
share capital;
( c) The cash portion of the Aggregate Subscription Consideration
of R150 million has been added to cash and cash equivalents;
(d) Once off transaction, implementation and restructuring costs of
R10 million (pre tax) or R7.2 million (post tax), all of which are
assumed to be tax deductible, are paid out of cash resources and
are adjusted to accumulated losses;
(e) The Pinebridge Settlement Amount of R13 million will be settled
out of earnings thereby increasing the Company`s accumulated loss.
This non-recurring cost is assumed to be non tax deductible;
(f) No effect of the DRA has been recognised as it is assumed that
this agreement was implemented on 31 August 2010, and therefore
the impact of any rescheduling of debt would not have occurred on
this date;
(g) No effect of the Claims Purchase Agreement has been recognised as
it is assumed that this agreement was implemented on 31 August
2010. The capital facility available in terms of the Claims
Purchase Agreement is on a draw down basis and subject to Blue
meeting predetermined vetting criteria. Accordingly it is assumed
that as at 31 August 2010 no drawdown would have occurred;
(h) The recognition of a long term liability totalling circa. R40.9
million arising due to the additional 10% shareholding in Blue
Nigeria as a result of the Blue Nigeria Claim as discussed in
Paragraph 1.2.2 of this announcement. It is assumed that the Blue
Nigeria Claim was effective 31 August 2010. The Blue Nigeria Claim
was adjusted to accumulated losses; and
(i) An adjustment of circa. R1.2m to non-controlling interest (which
has been adjusted to accumulated losses) representing the
proportionate minority interest value as a result of the
additional 10% shareholding in Blue Nigeria which is transferred
from minority interest to equity as discussed above.
The Early Conversion and the RenAsset Conversion
6 The `After the Early Conversion and the RenAsset Conversion` column has
been adjusted for the effects of the Early Conversion and the RenAsset
Conversion.
7 For purposes of calculating LPS and HLPS (After the Early Conversion
and the RenAsset Conversion), the unaudited pro forma financial effects
are calculated on the following assumptions:
(a) The Early Conversion and the RenAsset Conversion were implemented
on 1 March 2010;
(b) An interest saving of R16.5 million (pre tax) is reversed against
interest expense and is assumed to be taxable. The interest saving
has been calculated based on the total participants to the Early
Conversion and the RenAsset Conversion as at 1 March 2010 and the
actual interest incurred and reported for the 6 months ended 31
August 2010;
( c) The reversal of a foreign exchange gain totaling R6,6 million
(pre-tax) is reversed against other operating income and is
assumed to be tax deductible. The foreign exchange gain reversed
has been calculated based on the foreign exchange gain recognised
on the conversion of foreign denominated debt due to participants
to the Early Conversion and RenAsset Conversion as at 1 March 2010
and the foreign exchange gain reported for the six months ended 31
August 2010.
(d) Once off transaction costs of R2 million (pre tax) in aggregate
are paid out of cash resources, and are assumed to be tax
deductible;
(e) A full tax rate of 28% has been applied and the impact of any tax
losses is ignored;
(f) The issue of 1,712,719,093 Dilution Shares in accordance with the
Early Conversion and the RenAsset Agreements; and
(g) The issue of 1,382,715,676 Anti-dilution Shares in accordance with
the Subscription Agreement.
8 For purposes of calculating NAVPS and NTAVPS (After the Early
Conversion and the RenAsset Conversion), the unaudited pro forma
financial effects are calculated on the following assumptions:
(a) The Early Conversion and the RenAsset Conversion were implemented
on 31 August 2010;
(b) Share capital has been adjusted for:
I The issue of 1,712,719,093 Dilution Shares in accordance with the
Early Conversion and RenAsset Agreements. Dilution shares are
assumed to be issued at a fair value of 13 cents a share giving
rise to a R222.7 million adjustment to share capital.
II The issue of 1,382,715,676 Anti-dilution Shares in accordance with
the Subscription Agreement. Anti-dilution Shares are assumed to be
issued at the par value of R0.000001 a share for a cash
consideration of R1,382.72.
II The issue of Dilution and Anti dilution shares are indicative only
due to the fact that the debt being converted include foreign
denominated borrowings of BWP 36.4 million and USD 6.6 million
which have been converted at rates of ZAR/BWP = 1.01 and ZAR/USD =
6.74 respectively as at 7 January 2011. The ultimate conversion of
the debt will be impacted by the foreign exchange rates prevailing
at the effective date of the Early Conversion and the RenAsset
Conversion (being the date the conversion notices are issued by
Blue).
( c) Long term liabilities have been adjusted for the de-
recognition of debt to the value of R222.7 million based on the
total debt converted into Ordinary Shares in accordance with the
Early Conversion and the RenAsset Agreements; and
(d) Accumulated losses have been adjusted for:
Once off transaction costs of R2 million (pre tax) or R1.4 million
(post tax), all of which are assumed to be tax deductible, are
paid out of cash resources.
The Pinebridge Specific Issue
9 The `After the Early Conversion, RenAsset Conversion and Pinebridge
Specific Issue` column has been adjusted for the effects of the Early
Conversion and the RenAsset Conversion as detailed above, as well as
the effects of the Pinebridge Specific Issue.
10 For purposes of calculating LPS and HLPS (After the Early Conversion,
RenAsset Conversion and Pinebridge Specific Issue), the unaudited pro
forma financial effects have been calculated based on the assumptions
detailed above for the purposes of the Early Conversion and RenAsset
Conversion as well as the following additional assumptions,
specifically pertaining to the Pinebridge Specific Issue:
(a) The Pinebridge Specific Issue was implemented on 1 March 2010;
(b) The issue of 337,935,223 Dilution Shares accordance with the
Pinebridge Amendment Agreement; and
( c) The issue of 351,728,497 Anti-dilution Shares in accordance
with the Subscription Agreement.
11 For purposes of calculating NAVPS and NTAVPS (After the Early
Conversion, the RenAsset Conversion and Pinebridge Specific Issue), the
unaudited pro forma financial effects have been calculated based on the
assumptions detailed above for the purposes of the Early Conversion and
RenAsset Conversion as well as the following additional assumptions
specifically pertaining to the Pinebridge Specific Issue:
(a) The Pinebridge Specific Issue was implemented on 31 August 2010;
(b) Share capital has been adjusted for:
I The issue of 337,935,223 Dilution Shares in accordance with the
Pinebridge Amendment Agreement. Dilution shares are assumed to be
issued at a fair value of 13 cents a share giving rise to a R43.9
million adjustment to share capital.
II The issue of 351,728,497 Anti-dilution Shares in accordance with
the Subscription Agreement. Anti-dilution Shares are assumed to be
issued at the par value of R0.000001 a share for a cash
consideration of R351.73.
III The issue of Dilution and Anti-dilution Shares are indicative only
due to the fact that the debt being converted include foreign
denominated borrowings of USD6.1 million which have been converted
at a rate of ZAR/USD = 6.74 as at 7 January 2011. The ultimate
conversion of the debt will be impacted by the foreign exchange
rates prevailing at the effective date of the Pinebridge Specific
Issue (being the date the conversion notice is issued by Blue).
( C) Long term liabilities have been adjusted for the de-
recognition of debt to the value of R40.9 million based on the
total debt converted into Ordinary Shares as set out in Paragraph
1.2.2 of this announcement, in accordance with the Pinebridge
Amendment Agreement; and
(d) Accumulated losses have been adjusted for:
The Blue Claim of circa. R2.9 million which gives rise to the
issue of 22,731,277 Ordinary Shares as discussed in Paragraph
1.2.2 of this announcement. The Blue Claim Amount constitutes a
change in estimate of the number of Ordinary Shares to be issued
on the conversion of the Class C Convertible Redeemable Preference
Shares, as such represents an equity transaction and not the
recognition of an additional liability.
3.2 Illustrative effects of the potential issue of additional Dilution
Shares up to the Conversion Limit incorporating the Blue BEE
Transaction
The following table sets out the unaudited pro forma financial effects
of the potential issue of further Dilution Shares up to the Conversion
Limit as a result of the Blue BEE Transaction (as described in
Paragraph 2 of this announcement), the potential adjustment to the
maximum permissible amount (as described in paragraph 2.5 of this
announcement) as well as Anti-dilution Shares as contemplated in the
Subscription Agreement.
Illustrative effects of the potential issue of the maximum
permissible Early Conversion shares
Pro forma After %
before Maximum change
(1) Early
(cents) Conversion
(2)
(cents)
Loss per share (3.1) (2.6) 16%
Headline loss per share (3.1) (2.6) 16%
Net asset value per share 2.8 3.3 18%
("NAVPS")
Net tangible asset value per share (5.9) (4.2) 29%
("NTAVPS")
Number of shares in issue (`000) 5,663,314 6,580,346 16%
Weighted number of shares (`000) 5,663,314 6,580,346 16%
Further shares issued to Existing 449,346
Lenders (`000)
Further shares issued to Mayibuye 467,686
(`000)
Mayibuye shareholding(%) 51.0% 51.0% 0%
Additional Lenders shareholding(%) 0.0% 6.8% 100%
Existing Blue shareholders(%) 49.0% 42.2% (14%)
Notes:
1 The `Pro forma before` column is based on the unaudited pro forma
financial effects for the 6 months ended 31 August 2010 after adjusting
for the Early Conversion, RenAsset Conversion and Pinebridge Specific
Issue as set out in Paragraph 3.1 of this announcement.
2 The `After Maximum Early Conversion` column is based on a scenario
whereby relevant qualifying BEE parties will be offered to participate
in the Blue BEE transaction by virtue of acquiring Blue BEE Transaction
Debts up to a maximum amount of R50 million as well as the potential
adjustment to the maximum permissible amount. The unaudited pro forma
financial effects are calculated on the following assumptions:
(a) The potential scenario where the Blue BEE Transactions Debts as
well as the remaining outstanding debt to Existing Lenders amount
to R58.4 million. The R58.4 million has been arrived at by
reducing the Conversion Limit per the Early Conversion Agreement,
with the R266.6 million debt converted for the purposes of the
Transaction in order to cater for the potential adjustment to the
maximum permissible amount as described in Paragraph 2.5 of this
announcement;
(b) The issue of 449,345,685 Dilution Shares in accordance with the
Blue BEE Transaction and the potential adjustment to the maximum
permissible amount as described in Paragraph 2.5 of this
announcement. Dilution Shares are assumed to be issued at a fair
value of 13 cents a share giving rise to a R58.4 million
adjustment to share capital;
c) The issue of 467,686,325 Anti-dilution Shares as set out in
Paragraph 4.7 in the Recapitalisation Circular in accordance with
the Subscription Agreement are issued to Mayibuye and its
resulting shareholding is 51%. Anti-dilution shares are assumed to
be issued at the par value of R0.000001 a share for a cash
consideration of R467.69;
(d) The interest expense that is attributable to the outstanding debt
to Existing Lenders is assumed to have an average interest rate of
15% per annum. Consequently, an interest saving of circa. R4.4
million (pre tax), is added back to earnings for an assumed 6
month period. The interest saving is assumed to be fully taxable;
(e) The Dilution Shares and Anti-dilution Shares are assumed to be in
issue for the period from 1 March 2010 to 31 August 2010 for the
purposes of calculating the LPS and HLPS, illustrative effects;
and
(f) The Dilution Shares and Anti-dilution Shares are assumed to be
issued on 31 August 2010 for the purposes of calculating the NAVPS
and NTAVPS illustrative effects.
3.3 Illustrative effects of the potential issue of Dilution Shares and Anti-
dilution Shares
The following table sets out the unaudited pro forma financial effects
of the potential issue of future Dilution Shares and Anti-dilution
Shares under the high case scenario as detailed in the Recapitalisation
Circular after assuming the capital payment holiday of 36 months as
contemplated in the Debt Rescheduling Agreement and described in
Paragraphs 4.6 and 4.7 of the Recapitalisation Circular.
Illustrative effects of the potential issue of Dilution Shares
and Anti-dilution Shares
Pro forma High case (2) %
before(1) (cents) change
(cents)
Loss per share (3.1) (2.4) 23%
Headline loss per share (3.1) (2.4) 23%
Net asset value per share 2.8 4.2 50%
("NAVPS")
Net tangible asset value per (5.9) (2.9) 51%
share ("NTAVPS")
Number of shares in issue 5,663,314 7,024,691 24%
(`000)
Weighted number of shares 5,663,314 7,024,691 24%
(`000)
Further shares issued to 667,075
Existing Lenders (`000)
Anti-dilution Shares issued to 694,302
Mayibuye (`000)
Mayibuye shareholding (%) 51.0% 51.0% 0%
Additional Lenders 0.0% 9.5% 100%
shareholding (%)
Existing Blue shareholders (%) 49.0% 39.5% (19%)
Notes:
1 The `Pro forma before` column is based on the unaudited pro forma
financial effects for the 6 months ended 31 August 2010 after adjusting
for the Early Conversion, RenAsset Conversion and Pinebridge Specific
Issue as set out in Paragraph 1.2 of this announcement.
2 The `High case` column is based on a scenario whereby there remains
outstanding debt to Existing Lenders of R133.4 million that will result
in Dilution Shares and Anti-dilution Shares being issued as set out in
Paragraphs 4.6 and 4.7 of the Recapitalisation Circular. The unaudited
pro forma financial effects are calculated on the following
assumptions:
(a) The potential scenario where the outstanding debt to Existing
Lenders amount to R133.4 million. The R133.4 million has been
arrived at by reducing the high case scenario of R400 million per
section 4 of Annexure 2 of the Recapitalisation Circular, with the
R266.6 debt converted for the purposes of the Early Conversion,
RenAsset Conversion and Pinebridge Specific Issue;
(b) The issue of 667,074,695 Dilution Shares as set out in Paragraph
4.6 in the Recapitalisation Circular in accordance with the Debt
Rescheduling Agreement. Dilution shares are assumed to be issued
at a 30 day VWAP of 20 cents a share giving rise to a R133.4
million adjustment to share capital.
c) The issue of 694,301,234 Anti-dilution Shares as set out in
Paragraph 4.7 in the Recapitalisation Circular in accordance with
the Subscription Agreement are issued to Mayibuye and its
resulting shareholding is 51%. Anti-dilution Shares are assumed to
be issued at the par value of R0.000001 per share for a cash
consideration of R694.03;
d) The interest expense that is attributable to the outstanding debt
to Existing Lenders is assumed to have an average interest rate of
15% per annum. Consequently, an interest saving of circa. R10
million (pre tax), is added back to earnings for an assumed 6
month period. The interest saving is assumed to be fully taxable;
e) The Dilution and Anti-dilution Shares are assumed to be in issue
for the period from 1 March 2010 to 31 August 2010 for the
purposes of calculating the LPS and HLPS, illustrative effects;
and
(f) The Dilution and Anti-dilution Shares are assumed to be issued on
31 August 2010 for the purposes of calculating the NAVPS and
NTAVPS illustrative effects.
3.4 Illustrative effects of the potential issue of Warranty Shares
The following table sets out the unaudited pro forma financial effects
of the potential issue of Warranty Shares assuming a high case
scenario, however before the impact on the Blue BEE Transaction:
Illustrative effects of the potential issue of Warranty
Shares
Pro forma High case %
before(1) (2)(cents) change
(cents)
Loss per share (3.1) (5.3) (71%)
Headline loss per share (3.1) (5.2) (68%)
Net asset value per share 2.8 (0.1) (104%)
("NAVPS")
Net tangible asset value per (5.9) (7.7) (31%)
share ("NTAVPS")
Number of shares in issue 5,663,314 6,478,314 14%
(`000)
Weighted number of shares 5,663,314 6,478,314 14%
(`000)
Further shares issued to 815,000
Mayibuye (`000)
Mayibuye shareholding (%) 51.0% 57.2% 12%
Existing Blue shareholders 49.0% 42.8% (13%)
(%)
Notes:
1 The `Pro forma before` column is based on the unaudited pro forma
financial effects for the 6 months ended 31 August 2010 after adjusting
for the Early Conversion, RenAsset Conversion and Pinebridge Specific
Issue as set out in Paragraph 1.2 of this announcement.
2 The `High case` column is based on a potential scenario whereby a
warranty Claim Amount raised by Mayibuye will result in Warranty Shares
being issued as set out in Paragraph 4.5 of the Recapitalisation
Circular. The unaudited pro forma financial effects are calculated on
the following assumptions:
(a) The post-tax warranty Claim Amount is R163 million. The R163
million is consistent with the high case scenario per section 3 of
Annexure 2 of the Recapitalisation Circular. The high case
warranty Claim Amount must be viewed in light of an existing Claim
Amount estimated at R43.9 million as set out in Paragraph 1.2.2 of
this announcement and a potential Claim Amount estimated at R8
million;
(b) The issue of 815,000,000 Warranty Shares. Warranty Shares are
assumed to be issued at a 30 day VWAP of 20 cents per Blue share;
and
C ) The associated cost of issuing the Warranty Shares is credited
against share capital and debited against accumulated loss.
3 The once-off net after tax expense attributable to the potential
warranty Claim Amount is adjusted against the earnings of the Company
and will result in a cash outflow for Blue in order to settle the
associated expense.
4 Inter- Conditionality of the Transaction
4.6.1 Shareholders are advised that the Transaction as a whole is inter-
conditional on the RenAsset Conversion and the Early Conversion
being implemented, and that should the required shareholder
approvals not be obtained for either of the aforementioned
conversions, the Transaction as a whole will not be capable of
being implemented.
4.6.2 Shareholders are also advised that should the required shareholder
approvals not be obtained for the implementation of either or both
the Pinebridge Specific Issue and/or the Blue BEE Transaction, the
implementation of the RenAsset Conversion and the Early Conversion
may proceed. In addition, neither the Pinebridge Specific Issue
nor the Blue BEE Transaction are inter-conditional and either may
be implemented independently of the other.
5 POSTING OF CIRCULAR AND NOTICE OF GENERAL MEETING
Shareholders are hereby advised that the circular to Blue shareholders
containing the details of the Early Conversion, RenAsset Conversion,
the Pinebridge Specific Issue and the proposed Blue BEE Transaction and
incorporating the Notice of General Meeting of ordinary shareholders of
Blue to be held at 09h30 on Friday, 25 February 2011 at the registered
office of the Company, being Building 10, 107 Haymeadow Street,
Boardwalk Office Park, Faerie Glen, Pretoria, 0081, was posted to Blue
shareholders today Thursday, 10 February 2011.
6 WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
As the financial effects relating to the Early Conversion, RenAsset
Conversion, Pinebridge Specific Issue and the proposed Blue BEE
Transaction have been published as set out in paragraph 3 above,
shareholders are advised that they no longer need to exercise caution
when dealing in their Blue securities.
Pretoria
10 February 2011
Designated adviser to Blue
Grindrod Bank Limited
Financial adviser to Blue in relation to the Early Conversion
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited
Reporting accountants to Blue
Deloitte & Touche
Date: 10/02/2011 17:43:51 Produced by the JSE SENS Department.
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