| Mon 24 Jun 2002, 0:00 | | Confirmation Of The Capital Restructuring Of Relya |
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RLY
Confirmation Of The Capital Restructuring Of Relyant And Salient Dates
RELYANT RETAIL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1937/010108/06)
JSE share code: RLY ISIN: ZAE 000016457
("Relyant" or "the Group")
CONFIRMATION OF THE CAPITAL RESTRUCTURING OF RELYANT AND SALIENT DATES
1. Introduction
Relyant shareholders are referred to the detailed terms announcement
published on 8 April 2002, which set out the rationale for and terms of the
Relyant financial rescue involving the capital restructuring. The
outstanding details relating to the capital restructuring have now been
finalised and the restructure agreement was signed on 10 June 2002 ("the
signature date"). Accordingly, a circular setting out the full terms of the
restructuring will be posted to shareholders today, Monday 24 June 2002.
This announcement confirms the major features of the capital restructuring
and the salient dates relating thereto.
2. Rationale
Shareholders are referred to the Relyant Trading and General update
published on SENS on 3 May 2002 wherein it was indicated that the Group will
show a significant loss for the second six months to 30 June 2002.
Accordingly, the earnings for the year ending 30 June 2002 will be well
below those of the previous year, before taking into account any
restructuring provisions.
Factors influencing the Group's performance are:
- lower than expected sales due to lower demand in a heavily overtraded
market and a further tightening of the already strict credit criteria in the
lower end of the market;
- the high level of interest-bearing debt with rising interest rates; and
- the high level of gearing does not allow Relyant to take full advantage of
trading opportunities.
The Relyant Board of Directors ("the Board") believes that the high
gearing level needs to be addressed immediately to reduce the serious
financial risk of the business, the high interest costs and to provide the
trading flexibility necessary for Relyant to be a successful retailer into
the future.
The Board is adamant that this capital restructuring is essential for the
business to succeed in the prevailing, very tough environment. The capital
restructuring, which constitutes a rescue operation will, once implemented,
strengthen the Group's balance sheet, enable Relyant to trade competitively
within the retail sector as well as continue with its rationalisation
program and place it in a strong financial position to participate in any
industry consolidation that might occur. Relyant will remain listed on the
JSE Securities Exchange South Africa ("JSE"). In the Board's view, the
capital restructuring is a rescue mission and it is imperative in the best
interests of all of Relyant's key stakeholders, including customers,
suppliers, staff, debt funders and shareholders.
3. The capital restructuring
The capital restructuring plan will entail, inter alia, the following:
- the early conversion of the 22 727 272 6,5% compulsorily convertible
preference shares issued by Relyant ("the preference shares") into 17 482
516 Relyant ordinary shares after the declaration of all due and outstanding
preference share dividends;
- the introduction of a strategic international retail investor, POCO
International Holdings SA (In Incorporation) ("POCO"), to Relyant by way of
an issue of 51 676 000 ordinary shares for a cash price of 100 cents per
ordinary share to POCO ("issue of shares for cash");
- a rights offer fully underwritten firstly by POCO to the extent of R306
324 000 and then by the current bank debt funders of Relyant ("the debt
funders") to the extent of R433 515 971 ("the rights offer");
- new syndicated five year term loan facilities;
- restructuring of the Board; and
- the creation of certain restructure provisions and asset write-downs
amounting to approximately R510 million after tax,
(collectively referred to as "the capital restructuring").
POCO and the debt funders have agreed to restrict their ability to sell
their shares acquired pursuant to the issue of shares for cash and the
underwriting of the rights offer in order to ensure an orderly market in
Relyant ordinary shares.
4. Mandatory offer to shareholders
Subsequent to the issue of shares for cash and the rights offer, POCO
will hold at least 35% in the enlarged share capital of Relyant and the debt
funders may hold a percentage of up to 49,8% of the issued share capital of
Relyant. The debt funders shall individually hold the Relyant ordinary
shares issued to them in terms of the rights offer and not as a consortium.
The capital restructuring is deemed to be an affected transaction as defined
by the Securities Regulation Panel ("SRP"). This would have required POCO
and/or the debt funders to extend a mandatory offer to ordinary shareholders
in Relyant in existence prior to the capital restructuring. Shareholders are
referred to the announcement on SENS on 13 May 2002, wherein it was stated
that on the basis that the proposed capital restructuring constitutes a
rescue operation of Relyant, the SRP has deemed it appropriate to grant POCO
and/or the debt funders of Relyant dispensation from the obligation to make
an offer to the minority shareholders of Re
lyant in terms of Rule 34 of the SRP Code.
5. The Group rationalisation
In order to streamline the trading operations of the Group, the directors
have resolved, subject to consultation with and approval by POCO and
FirstRand Bank Limited, in its capacity as Lead Bank as appointed by the
debt funders, or such other debt funder which may be appointed as Lead Bank
by the debt funders from time to time ("the Lead Bank"), to consolidate the
furniture trading and service operations of Relyant (the ex-Amalgamated
Retail Limited ("Amrel") furniture trading and service operations),
Peninsula Furnishers (Proprietary) Limited (two regional trading stores) and
its wholly-owned subsidiary Relyant Trading (Proprietary) Limited (housing
the business of the ex-Beare Group, formerly a division of McCarthy) into
one single statutory entity, Relyant Trading (Proprietary) Limited. In
addition, the investments in Furnguard Insurance Company Limited and Relyant
Life Assurance Company Limited held by Relyant Retail Limited will be
disposed of to its wholly-owned subsidiary Relyant Insurance Comp
any Limited in order to consolidate the Group's insurance operations.
Relyant Retail Limited will then become a listed holding company with
investments in furniture retail and service operations via Relyant Trading
(Proprietary) Limited and investments in short-term insurance and life
assurance operations held via Relyant Insurance Company Limited. This Group
rationalisation will have no effect on the reported Group results or
financial position.
6. Financial effects
Set out below are the pro forma financial effects of the capital
restructuring on a Relyant ordinary shareholder, based on the assumptions
set out below.
Pro forma
Pro forma Percentage "After
Actual "After decrease restructure
Per share "Before" recapitalisation" (%) provisions"
Tangible gearing (%) 120,1 21,5 82,1 35,1
Fully diluted
earnings/(loss) (cents) 39,8 7,2 81,9 (46,1)
Fully diluted headline
earnings/(loss) (cents) 44,3 7,8 82,4 (45,6)
Net asset value
(including intangibles)
(cents) 1 127,2 187,4 83,4 134,1
Net asset value
(excluding intangibles)
(cents) 985,0 173,2 82,4 119,8
Fully diluted weighted
average number of
ordinary shares ('000) 95 970 959 277 - 959 277
Notes:
4.1 The fully diluted earnings and fully diluted headline earnings per
Relyant share in the "Before" column are based on the published unaudited
results of Relyant for the six month period ended 31 December 2001.
4.2 The fully diluted earnings and fully diluted headline earnings per
Relyant share in the pro forma "After recapitalisation" column are based on
the published unaudited results for the six month period ended 31 December
2001, adjusted to include:
- the impact of the cash received in terms of the additional capital
raised, as a result of the issue of shares for cash and the rights offer,
after costs, assuming the cash was received with effect from 1 July 2001,
- the interest incurred on the preference shares in terms of AC125 of
R6,6 million and the secondary tax on companies on the preference dividends
declared of R6,1 million,
- the accrual for debenture issue expenses previously set-off against
debenture premium, and
- the acceleration of settlement of the debt element of the compulsorily
convertible debentures, which acceleration was implemented at 30 May 2002 by
converting the capital portion of the compulsorily convertible debentures to
a short-term loan for a total settlement amount of R46,3 million (at an
interest rate which is more favourable to Relyant than that which was
applied to the compulsorily convertible debentures).
The weighted average number of shares in issue and used in the
calculation is 959,277 million and the after tax interest rate saving used
was 8.75%.
4.3 The net asset value per Relyant share in the Actual "Before" column is
based on the published unaudited position of Relyant at 31 December 2001.
4.4 The net asset value per Relyant share in the Pro forma "After
recapitalisation" column is based on the assumption that the issue of shares
for cash and the rights offer had been implemented at 1 July 2001 and
includes the effect of the acceleration of the settlement of the capital
portion of the compulsorily convertible debentures (as detailed in note 4.2
above) and the subsequent cash out flows in respect thereof, R6,1 million in
respect of secondary tax on companies arising on the preference dividends
declared and total cash costs incurred on the restructure transaction of
R5,0 million. The number of shares used in the calculation is 959,277
million on a fully diluted basis.
The financial effects in the pro forma "After restructure provisions"
column is based on the assumption that the restructure provisions and asset
write-downs amounting to approximately R510 million after tax had been
implemented at 1 July 2001.
7. Conditions precedent
The capital restructuring is subject to inter alia, the following
conditions precedent:
- by not later than Friday, 2 August 2002, the JSE and the SRP grant their
approval for the capital restructuring and any other documents submitted to
the JSE and SRP, either unconditionally or on such conditions as Relyant,
the Lead Bank and POCO may agree in writing to be acceptable;
- by Friday, 2 August 2002, the SRP has not revoked any rulings or any
subsequent rulings which it may have granted on or before that date;
- by not later than Friday, 19 July 2002, the South African Reserve Bank, to
the extent that it may be required, in writing approves the circular for the
rights offer;
- by not later than Friday, 19 July 2002, the shareholders in Relyant
(including the holders of the preference shares), pass resolutions to
authorise the capital restructuring and to authorise the implementation of
the capital restructuring;
- within 30 days from the signature date, the Competition Commission, grants
its final approval to the capital restructuring, either unconditionally or
on such conditions as the debt funders, POCO and Relyant may agree to be
acceptable;
- within 15 business days from the signature date, POCO advises the Lead
Bank that it approves the proposed implementation of the transactions
required to effect the Group rationalisation; and
- within 15 business days from the signature date, POCO delivers to the Lead
Bank and delivers a copy to Relyant of an irrevocable guarantee issued by a
reputable bank in favour of Relyant and payable against the fulfilment of
the conditions precedent and the allotment, issue and delivery of the
relevant number of ordinary shares in terms of the issue of shares for cash
and the rights offer.
5. Special Arrangements
Undertakings to vote in favour of the capital restructuring have been
received from certain Relyant ordinary shareholders and Relyant preference
shareholders. Based on the fact that the Relyant preference shareholders can
vote to the extent allowed at the Relyant ordinary shareholders' meeting,
the votes of shareholders who have agreed to vote, and are allowed to vote,
in favour of the capital restructuring, collectively amount to approximately
61% of the ordinary shareholders' votes, exercisable at the Relyant ordinary
shareholders' general meeting in respect of the resolutions to approve the
capital restructuring.
Seawind 13 (Proprietary) Limited being the holder of all the preference
shares has agreed to vote in favour of the capital restructuring at the
ordinary and preference shareholders' meetings to the extent allowed.
6. Documentation
A circular will be posted to shareholders today, Monday 24 June 2002,
setting out the full terms and effects of the capital restructuring and
containing notices convening general meetings of ordinary shareholders and
preference shareholders. At the general meetings, ordinary shareholders and
preference shareholders will be required to consider and, if deemed fit,
approve the resolutions required to implement the capital restructuring.
7. Salient Dates
2002
Circular and notices of ordinary shareholders' and
preference shareholders' meetings posted on Monday, 24 June
Forms of proxy for the Relyant ordinary shareholders'
general meeting to be lodged by no later than 09:00 on Monday, 15 July
Forms of proxy for the Relyant preference shareholders'
general meeting to be lodged by no later than 11:00 on Monday, 15 July
Relyant ordinary shareholders' general meeting to
be held at 09:00 on Tuesday, 16 July
Relyant preference shareholders' general meeting to
be held at 11:00 on Tuesday, 16 July
Results of the ordinary shareholders' and preference
shareholders' general meetings to be announced on
Securities Exchange News Service of JSE on Tuesday, 16 July
Johannesburg
24 June 2002
Merchant bank
Investec Corporate Finance
(Registration number 1969/004763/06)
Sponsor to Relyant
Investec Bank Limited
(Registration number 1969/004763/06)
Independent reporting accountants to Relyant
Deloitte & Touche
Legal adviser to Relyant
Peter Dawe and Associates
Corporate adviser to POCO
Gensec Bank Limited
(Registration number 1996/004744/06)
Legal adviser to POCO
Feinsteins Attorneys
(Registration number 1995/001716/21)
Legal adviser to the debt funders
Jowell, Glyn & Marais Inc
(Registration number 1990/000849/21)
Date: 24/06/2002 12:30:30 PM Produced by the SENS Department
