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Edcon - Securitisation Of A Further Portion Of The Edcon Debtors Book
Release Date: 10/06/2004 16:11:01 Code(s): ECO
EDCON - SECURITISATION OF A FURTHER PORTION OF THE EDCON DEBTOR`S BOOK
EDGARS CONSOLIDATED STORES LIMITED
`Edcon`
(Reg. No. 1946/022751/06)
(Incorporated in the Republic of South Africa)
Share Code: ECO ISIN Code: ZAE000018388
SECURITISATION OF A FURTHER PORTION OF THE EDCON DEBTOR`S BOOK (`THE
SECURITISATION`)
INTRODUCTION
On 11 May 2004, Edcon stated in its profit announcement for the year to March
2004 that the Board of Directors of Edcon had approved the securitisation of a
further portion of its debtors` book. Shareholders are advised that the
securitisation has been successfully implemented and that, in terms of the
securitisation, OntheCards Investments Limited (`OntheCards`) has acquired from
Edcon a portion of its debtors` book.
TERMS OF THE SECURITISATION
Edcon will sell (free of any encumbrance) and assign certain existing and future
debtors` obligations to OntheCards on a non-recourse basis. The portion of the
debtors` book to be acquired by OntheCards will consist of just under 700 000
accounts with a total value of approximately R1.1 billion.
OntheCards will fund the acquisition of the Edcon debtors` book as follows:
Rm
Class A Secured Floating Rate Notes 800
Class B Secured Floating Rate Notes 95
Subordinated loan from Rand Merchant Bank, a division of 170
FirstRand Bank Limited (`RMB`)
Total 1 065
The Floating Rate Notes, which mature on 30 June 2006, will be listed on the
Bond Exchange of South Africa with effect from 15 June 2004. The notes were
auctioned on 10 June 2004 and the price obtained above the Johannesburg Inter
Bank Acceptance Rate was 0.4% in respect of the Class A Secured Floating Rate
Notes and 1.18% in respect of the Class B Secured Floating Rate Notes. The
notes were 2.6 times subscribed.
The disposal of the debtors` book to OntheCards will generate a cash inflow of
approximately R1.1 billion. Out of these proceeds, Edcon will acquire an
exposure to OntheCards through an indirect credit-linked investment of R170
million. The credit risk assumed by Edcon will be linked to the subordinated
loan provided to OntheCards by RMB and there will be no recourse to Edcon on any
of the debtors` sold. Accordingly, the net cash benefit to Edcon arising out of
the securitisation will amount to approximately R900 million.
Edcon has entered into a servicing agreement with OntheCards in terms of which
it will continue to manage the debtors acquired by OntheCards in the ordinary
course of its credit management business. Edcon will be liable for an amount of
up to R30 million in the event that it is unable to fulfil its obligation in
terms of this servicing agreement.
FINANCIAL EFFECTS OF THE SECURITISATION
The securitisation will also result in a significant reduction in the cost to
Edcon of funding its debtors, as the interest payable on the Secured Floating
Rate Notes is lower than the equivalent term bank funding available to Edcon.
Based on current interest rates and the amount raised, the annual pre-tax
interest saving to Edcon would amount to approximately R9 million.
FURTHER DOCUMENTATION
OntheCards published a programme memorandum on 8 June 2004 and will issue a
pricing supplement setting out full terms and conditions of the Secured Floating
Rate Notes and the securitisation. Copies of the programme memorandum and
pricing supplements are available on request at the following locations:
RMB 16th Floor, 1 Merchant Place, Corner Rivonia and Fredman
Drive, Sandton, 2196
Cazenove First Floor, Moorgate, Dunkeld park, 6 North Road, Dunkeld
West, 2196
Edcon Edgardale, Press Avenue, Crown Mines, 2092
Johannesburg
10 June 2004
Sponsor to Edcon
Cazenove
Arranger
Rand Merchant Bank
(A division of FirstRand Bank Limited)
Merchant bank
Rand Merchant Bank Corporate Finance
(A division of FirstRand Bank Limited)
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