| Tue 19 Nov 2002, 17:47 | | Altron - Securitisation of Fintech lease portfolio |
|
Altron - Securitisation of Fintech lease portfolioALLIED ELECTRONICS CORPORATION
LIMITED(Incorporated in the Republic of South Africa)(Registration number
1947/024583/06)Share code: ATN ISIN: ZAE000029658Share code: ATNP
ISIN: ZAE000029666(Altron)Securitisation of Fintech lease
portfolioIntroductionIn an announcement published on 12 November 2002,
shareholders of Altron were advised that its wholly-owned subsidiary, Altron One
(Pty) Limited (previously Fintech (Pty) Limited (Fintech)), had securitised a
portion of its office equipment lease portfolio through a special purpose
company, Fintech Receivables 1 (Pty) Limited (Fintech Receivables) (the
securitisation). In addition, Fintech will sell the management and
administration side of Fintech`s business (the Business) as well as other
Fintech group administration income flows for R13 million to a new company
recently formed known as Fintech (Pty) Limited (New Fintech), in which Gensec
Bank Limited (Gensec), Fintech management and Altron will be equal shareholders
(the sale of Business). Altron has also independently agreed to sell its 50%
interest in Spartan Computer Rentals (Pty) Limited (Spartan) to Gensec for R7
million (the sale of Spartan).This announcement sets out the detailed terms and
financial effects of the securitisation, the sale of Business and the sale of
Spartan (collectively the transactions).Nature of business and rationale for the
transactionsFintech is the largest independent office automation equipment
financier in South Africa. It finances and administers a portfolio of office
equipment leases on equipment supplied by select vendor partners, including
Bytes Communication Systems, National Data Systems, Gestetner SA and Xerox South
Africa (lease portfolio). The lease portfolio contains a quality mix of high
grade corporate and government lessees with no unsecured loans.Fintech has
historically funded the lease portfolio using equity and bank funding in an
approximate ratio of 20:80. It has, however, become increasingly difficult to
source appropriately priced funding for the growing lease portfolio and hence
Fintech decided to explore alternative means of funding.Securitisation is a
process whereby assets are sold to a special purpose vehicle that issues
tradeable marketable securities to investors to fund the assets. It offers a
lower cost of borrowing and results in more efficient funding and has become
increasingly common in overseas markets in the past two decades. It effectively
results in the refinancing of existing assets.Fintech chose securitisation to
refinance its lease portfolio in order to take advantage of the overall lower
cost of borrowing and the increased efficiency of funding, which frees up
resources within Altron and its subsidiaries (the Altron group).The sale of
Business enables Fintech to focus on its core business of providing ongoing
funding for leases originated from within the Altron group. Fintech will also
retain the remaining existing lease portfolio amounting to approximately R320
million.Spartan is being sold to Gensec independently of the securitisation and
sale of Business. Spartan is not core to Fintech`s business of funding Altron
group lease finance assets and it was deemed appropriate to sell the 50%
shareholding in Spartan.Terms of the transactionsFintech Receivables has
purchased R680 million of the lease portfolio from Fintech (the securitised
lease portfolio). Altron has retained a R27.4 million interest in the
securitised lease portfolio though a participation loan (participation loan) and
has also provided a subordinated start-up loan of R20.4 million (start-up loan)
to Fintech Receivables. The remaining R653 million of the securitised lease
portfolio has been financed through the sale of R619 million Class A Secured
Floating Rates Notes due 15 November 2011 at an issue price of 100% and at a
spread to 3 month Johannesburg Inter-Bank Agreed Rate (JIBAR) of 75 basis points
(A notes), and R34 million Class B Secured Floating Rates Notes due 15 November
2011 at an issue price of 100% and at a spread to 3 month JIBAR of 240 basis
points (B notes). In addition, Altron will subscribe for a participating
preference share in Fintech Receivables (pref). The pref will have the right to
any residual income in Fintech Receivables, after the A notes, B notes,
participation loan and start-up loan have been serviced.New Fintech will
purchase the Business from Fintech for R8 million and has agreed to acquire
other Fintech group administration income flows for R5 million. Gensec,
management of Fintech and Altron will become equal shareholders in New Fintech.
All shareholders, including Altron, will invest R8.3 million in New Fintech and
hence the net proceeds to Altron from the sale of the Business will be
R4.7million.Altron has also independently agreed to sell its 50% interest in
Spartan to Gensec for R7 million. The sale of Spartan is still conditional upon
the waiver of pre-emptive rights by the other shareholder in Spartan.Application
of proceedsFintech will apply the net proceeds from the securitisation of R653
million, the net proceeds from the sale of Business of R4.7 million and the
proceeds from the sale of Spartan of R7 million to invest in the participation
loan and the start-up loan and to reduce Fintech`s debt, which was previously
used to fund the lease portfolio.Pro forma financial effectsThe table below sets
out the illustrative pro forma financial effects of the transactions based on
the published interim financial information of Altron for the 6 months ended 31
August 2002 and assumes that the transactions had been concluded for income
statement purposes on 1 March 2002 and for balance sheet purposes on 31 August
2002: Before1 After %
Change
Earnings per share (cents) 114.9 114.02 (0.8)
Headline earnings per share (cents) 59.0 58.12 (1.5)
Net asset value per share (cents) 820.4 819.73 (0.1)
Net tangible asset value per share (cents) 732.0 731.33 (0.1)
Weighted average number of shares
in issue (000) 268 839 268 839 -
Number of shares in issue (000) 269 772 269 772 1.
The before financial information has been extracted, without adjustment, from
the published, interim results of Altron for the 6 months ended 31 August
2002.2. Earnings and headline earnings per share have been adjusted as
follows:To exclude the income and expenses relating to the securitised lease
portfolio, the Business and Spartan for the 6 months ended 31 August 2002;To
include the interest received on the participation loan, calculated at an after
taxation rate of 14%, and the interest received on the start-up loan, calculated
at an after taxation rate of 11.2%;To include the reduction in the interest paid
with respect to the funding of the securitised lease portfolio as a result of
the cash received from the sale of the Business and the sale of Spartan; To
include Altrons equity share of New Fintech (33%); andTo include the interest
received and the interest paid resulting from the refinancing of the remaining
existing lease portfolio.3. Net asset value and net tangible asset value per
share has been adjusted as follows:To exclude the assets and liabilities
relating to the securitised lease portfolio, the Business and Spartan at 31
August 2002;To include the cash received and the profit/loss on disposal arising
on the disposals of the Business and Spartan;To include the effects of the
participation loan and the start-up loan; andTo include the loans and cash
inflow resulting from the refinancing of the remaining existing lease
portfolio.Circular to shareholders and withdrawal of cautionary announcementA
circular to Altron shareholders, setting out the details of the transactions,
will be issued within 28 days. Altron shareholders are advised that they no
longer need to exercise caution when dealing in Altron securities.
Johannesburg19 November 2002
Investment bank and joint sponsorNEDCOR INVESTMENT BANKIndependent reporting
accountantsKPMGJoint SponsorCAZENOVE
Date: 19/11/2002 05:37:00 PM Produced by the JSE SENS Department
