| Wed 28 Nov 2001, 0:00 | | Thebe Financial Services Limited/tfs Investm |
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Announcement Regarding the Disposal of FBC
Thebe Financial Services Limited
(Incorporated in the Republic of South Africa)
(Registration number 1993/092509/06)
Share code TBE ISIN ZAE000017265
("TFS")
TFS Investments Limited
(formerly FBC Fidelity Bank Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1904/002902/06)
Share code TFS ISIN ZAE000016093
("TFSI")
Final Announcement Regarding the Disposal of FBC Fidelity Bank Limited
("FBC") to Nedcor Bank Limited ("Nedcor")
1. INTRODUCTION
Shareholders of TFS and TFSI ("shareholders") and linked unitholders of TFSI
("linked unitholders") are referred to the circular dispatched to them on 31
August 2000, wherein it was disclosed that final agreement had been reached,
subject to the fulfilment of certain conditions precedent, between Nedcor,
TFSI, TFS, FBC, FutureBank Corporation Limited, R K Store (in his capacity
as the then curator of FBC), the South African Reserve Bank ("SARB") and
Fedsure Holdings Limited ("Fedsure") ("the Nedcor/FBC Agreement"), in terms
of which Nedcor acquired control of FBC and FBC's curatorship was lifted
("the transaction"). The salient terms of the Nedcor/FBC Agreement included
the following:
* Nedcor would propose a scheme of arrangement ("the Scheme") between FBC
and its depositors and creditors (apart from certain excluded creditors as
defined in the Scheme) in terms of section 311 of the Companies Act 61 of
1973 (as amended);
* Nedcor would inject new capital into FBC by way of a subscription for R500
million of new ordinary shares in FBC, as a result of which Nedcor would
become the new controlling shareholder of FBC;
* TFSI's 100% ordinary share interest in FBC would be converted into a like
number of non-voting compulsorily convertible preference shares in FBC ("the
FBC prefs") for a pre-determined period and would be reconverted into FBC
ordinary shares based on a valuation of FBC as at 31 July 2000 to be
undertaken at the end of such period ("the final NAV determination"); and
* Nedcor was entitled to inject other businesses and operations into FBC and
in fact, has, subject to regulatory approval, subsequently sold its Peoples
Bank division into FBC.
2. Final NAV determination
In terms of the Nedcor/FBC Agreement:
* Nedcor was obliged to produce and deliver to TFSI a net asset value
certificate retroactively calculating the net asset value of FBC as at the
effective date of 31 July 2000 ("the final NAV certificate"), within 14 days
of receipt of the audited financial statements of FBC as at and for the six
months ended 30 June 2001. The purpose of the final NAV certificate was to
show the net asset value of FBC as reflected in the effective date
management accounts adjusted in accordance with the principles agreed in the
Nedcor/FBC agreement ("the final NAV"); and
* upon the final NAV determination, an adjustment is made based on an agreed
formula, which effectively results in the FBC prefs being converted back to
ordinary shares, on a one-to-one basis. To the extent that the final NAV (as
reflected in the final NAV certificate) inclusive of the face value of the
subordinated shareholder loans provided by TFSI and Fedsure is less than
R0,00, TFSI is required to transfer its resultant entire ordinary
shareholding in FBC to Nedcor for no consideration.
On 18 September 2001, Nedcor delivered the final NAV certificate to TFSI,
which reflected a negative final NAV of FBC of R427,712 million. The
implications for TFSI of this are as follows:
2.1 TFSI has ceded the full amount of its subordinated shareholder loan in
FBC to Nedcor for no consideration;
2.2 the FBC prefs have been converted in accordance with their terms into
ordinary shares in FBC;
2.3 the resultant ordinary shares in FBC held by TFSI have been transferred
by TFSI to Nedcor for no consideration and TFSI thus has no further equity
interest in FBC; and
2.4 TFSI may and has exercised its rights under the Nedcor/FBC Agreement in
terms of which TFSI is able to purchase from FBC any advances in FBC which
TFSI, in its sole discretion, believes may have been over-provided for by
Nedcor ("the repurchase rights").
3. Repurchase rights
TFSI, or its nominee, was entitled to exercise the repurchase rights, at the
net amount ascribed to the assets concerned in the books of FBC as at the
final NAV determination date. As TFSI was not in a financial position to
repurchase any such assets, which could not be realised in a short period of
time, a sub-committee of the TFSI board of directors ("the TFSI sub-co")
nominated Thebe Investment Corporation (Proprietary) Limited ("TIC"), as
TFSI's nominee, to repurchase certain of the assets from FBC, subject to TIC
paying to TFSI a commercially determined fee for the repurchase rights. TFSI
purchased the remaining assets in its own capacity and realised them for a
gross cash consideration of R10,016 million. This process and the fee
arising was unanimously approved by the independent directors on the TFSI
sub-co. In this manner, TFSI and TIC repurchased from FBC in aggregate loans
with an outstanding balance of R54 million and with a net asset value of R4
million. These assets were identified as a result of the exercise by TFSI of
its rights of mitigation provided for under the Nedcor/FBC Agreement in
terms of which TFSI appointed a mitigation team to advise TFSI through this
process. The costs of this exercise were borne by TFSI, but were
significantly lower than the gross proceeds received.
4. Disposal of Edu-Loan
TFSI previously held a 23,8% interest in the issued share capital of Edu-
Loan (Proprietary) Limited ("Edu-Loan"), the main business of which is to
finance education loans as a microlender utilising the PERSAL deduction
system. In terms of the Nedcor/FBC Agreement, TFSI's shareholding in Edu-
Loan was pledged to Nedcor as security for loans owing by TFSI to FBC. In
addition, TFSI extended an option to Edu-Loan, its shareholders and their
nominees to acquire the entire TFSI interest in Edu-Loan before 31 December
2001 ("the Edu-Loan option"). As the final NAV is negative, Nedcor has
elected to exercise its pledge and thereby take over TFSI's entire interest
in Edu-Loan and, in turn, has agreed to honour TFSI's obligations in terms
of the Edu-Loan option. In this regard, Nedcor and TFSI have agreed a value
of R5 million for the Edu-Loan shares, which will serve to reduce the amount
of the liability owing by TFSI to FBC. In the event that the Edu-Loan option
is exercised, Nedcor and TFSI have agreed to share any upside on a 50/50
basis.
5. Future of TFSI
It was originally hoped that FBC's retrospective final NAV would be positive
and TFSI would thus have an ongoing equity interest in the new Peoples Bank.
However, as the final NAV is substantially negative, TFSI will not have any
equity interest in Peoples Bank. In addition, after the disposal of its
interest in Edu-Loan to Nedcor in terms of the arrangements described in 4
above, TFSI will have no significant assets and certain outstanding
liabilities. Accordingly, the TFSI board has resolved to sell off all
assets/cede any rights due for consideration, and settle all liabilities,
and will thereafter propose a voluntarily liquidation of TFSI and its
subsidiaries.
An application will be made to the JSE Securities Exchange South Africa
("JSE") to terminate the listing of TFSI, once the arrangements recorded in
this announcement have been concluded. In addition, an application will be
made to the Registrar of Companies as soon as is practicable to proceed with
the voluntary winding-up of TFSI. Shareholders and linked unitholders will
be notified of further developments in this regard in due course.
6. Future of TFS
Prior to the curatorship of FBC in October 1999, the investment in TFSI was
TFS' largest investment. As it has become clear that this investment will
not yield any value for TFS, the board of TFS has decided, subject to TFS
shareholders' approval, to embark on a process to dispose of TFS' remaining
interests in Thebe Risks & Benefits Group Holdings (Proprietary) Limited
(50,1%) and Safrican Insurance Limited (51%). The disposal of these
interests will result in TFS becoming a cash shell, whereafter it is
proposed that TFS be voluntarily liquidated. A further announcement and
circular outlining the proposed disposals and the proposed liquidation of
TFS will be sent to TFS shareholders in the near future.
7. Continued suspension of listing and cautionary announcement
The JSE has agreed to the continued suspension of the TFS and TFSI equity
instruments until such time as the arrangements referred to in this
announcement have been concluded. Notwithstanding this, shareholders and
linked unitholders are urged to exercise caution in any dealings in their
equity instruments until further announcements are made.
Rosebank
27 November 2001
Investment bank and sponsor
Nedcor Investment Bank
Attorneys
Webber Wentzel Bowens
