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BoE Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/003281/06)
Share code BOE ISIN ZAE 000014890
("BoE")
BoE sells NBS Home Loan Book for R11.9 billion in cash
1. Introduction
BoE is pleased to announce that it has reached an agreement in
terms of which it will sell to FirstRand Bank Limited
("FirstRand") a retail mortgage book (the "Home Loan Book"), for
a consideration of approximately R11.9 billion to be settled in
cash (the "Transaction").
2. Rationale for the Transaction
BoE's stated strategy is to focus on markets in which it can
create a competitive advantage and thereby generate attractive
returns for its shareholders. The retail mortgage market has
become increasingly commoditised and dominated by the larger
banks who benefit from economies of scale.
The sale of the Home Loan Book will not affect the operations of
NBS, a division of BoE Bank Ltd, which will continue to provide
a full range of financial services to its clients. NBS will
originate home loans for FirstRand and other major banks on a
"best advice" basis, thereby giving its clients access to
competitive home loans.
The Transaction will have a significant positive effect on BoE's
liquidity and capital requirements without detracting from the
range of products and services NBS offers. NBS continues to be a
profitable and core component of BoE's retail strategy,
alongside PEP Bank, Credcor and Cashbank.
All business divisions within BoE are trading profitably, and
BoE's financial position remains robust with shareholders' funds
in excess of R6 billion. The transaction proceeds of
approximately R11.9 billion will result in a substantial boost
to BoE's cash resources, bolster the liquidity cushion, reduce
its cost of funding and enhance returns for shareholders.
Tom Boardman, Chief Executive Officer of BoE, commented:
"Recent events in the banking industry have heightened concerns
over liquidity. BoE has consistently met all of its liquidity
requirements. The directors of BoE have full confidence that it
will continue to do so, particularly in light of the substantial
cushion provided by the R12 billion cash proceeds of this
transaction."
3. Description of the assets being sold
As at 28 February 2002, the Home Loan Book amounted to
approximately R11.9 billion of which R11.6 billion comprised
performing loans and R330 million comprised non-performing
loans. The Home Loan Book includes R679 million relating to
securitised home loans previously purchased from Saambou.
FirstRand will assume all the obligations in relation to these
mortgages and the rights of borrowers will be protected.
BoE will retain the Properties in Possession (PiP's), which have
been aggressively managed down and a substantial portion of the
remainder of the PiP's are expected to be realised within the
current financial year.
The Transaction also includes BoE's related Home Owners' Cover
insurance policies. In addition, BoE and FirstRand have signed
an origination agreement whereby BoE will originate mortgages on
behalf of FirstRand, on a non-exclusive basis.
4. Salient terms of the Transaction
The total purchase consideration will be approximately R11.9
billion in cash. The consideration will be settled by an initial
payment of R5 billion, followed by seven monthly instalments of
approximately R1 billion each. BoE will earn interest on the
outstanding amounts from the Effective Date at a rate of
interest of 0.2% over the South African Repo rate.
The consideration will be adjusted for cash movements up to the
Effective Date.
5. The Effective Date
The Transaction has received all necessary regulatory approvals.
The only remaining condition to be fulfilled is completion of
legal documentation, which is expected to be finalised within
days (the "Effective Date"). BoE will assist in the
administration and collections of the Home Loans Book beyond the
Effective Date to ensure an efficient handover to FirstRand and
to minimise disruption for clients.
Cape Town
14 March 2002
Financial adviser to BoE Merchant Bank to
BoE
UBS Warburg Corporate BoE Merchant Bank
Finance (SA) (Pty) Ltd
A financial services A division of BoE
group of ABS AG Bank Ltd
(Registration number (Registration
1994/008363/07) number
1951/000847/06)
Lead sponsor to BoE Sponsor to BoE
UBS Warburg Securities BoE Securities
(SA) (Pty) Ltd (Pty) Ltd
A financial services Member of the JSE
group of UBS AG Securities Exchange
South Africa
(Member of the JSE)
(Registration number (Registration
1995/011140/07) number
1995/012240/07)
Corporate law advisers
to BoE
Jurgens Bezuidenhout
Attorneys
Jurgens Bezuidenhout
Attorneys
Independent Reporting Accountants
Ernst & Young
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