Group Five Finalises Agreement with Funders and Obtains R650 Million Secured Senior Bridge Funding
Further to the SENS announcements released on 29 March 2018 and 12 April 2018 advising shareholders that Group Five had signed a term sheet with a funding consortium for R650 million of short-term bridge funding, the board of directors is pleased to announce that Group Five and its subsidiary Group Five Construction Proprietary Limited (“G5C”) have now concluded and entered into a senior bridging facilities agreement (“Bridge Agreement”), and a creditors standstill agreement
(“Standstill Agreement”) with regards to this secured short-term bridge funding.
1. The Bridge Agreement includes the following salient terms:
1.1. The R650 million secured bridge funding (“Bridge Funding”) is for a 12-month period and was obtained from a consortium of local banks (“the Consortium”) to address the mismatch between the short-term funding needs of the Group, mainly as a result of a declining South African construction order book, as well as cash funding required to complete the Group’s Kpone contract in Ghana, and the rate at which claims, debtors and non-current assets could be realised to fund outflows.
1.2. The Bridge Agreement contains financial covenants and events of default, typical for transactions of this nature.
1.3. The Bridge Funding terms includes a structuring fee and time-variable interest rates at market- related pricing as is customary for financing transactions of this nature.
1.4. The Bridge Agreement includes mandatory prepayment triggers customary for debt financing. G5C may also voluntarily pre-pay the loan without penalty. Therefore, the Bridge Agreement is not a “restrictive funding arrangement”, as such term defined in the JSE Limited Listings requirements.
1.5. The Bridge Funding security, which secures both this new facility and existing lending arrangements, is comprised of a pledge and cession in security by the Group of its rights, title and interest in:
• its Manufacturing assets,
• its European Investments (namely its service concessions investments) and
• its European operations & maintenance businesses.
2. The Standstill Agreement includes the following salient terms:
2.1. Group Five has executed a Standstill Agreement with the Consortium and an insurance partner (the “Standstill Creditors”) to principally ensure that the Standstill Creditors do not terminate any of their existing facilities or cancel or reduce any available commitment or limit in terms of their existing facilities, and to provide a temporary suspension of any enforcement action under the existing funding documents.
2.2. The standstill period shall terminate on the earlier of the discharge date of the Bridge Funding or any event of default. The discharge date is expected to be 12 months from 11 May 2018.
The Group also continues to improve its free cash position through the recovery of long-outstanding debtors and the conversion of non-current assets and other cash-enhancing initiatives. These cash recoveries and initiatives are expected to provide an enhancement to the Group’s cash position over an 18-month period. As announced in the Group’s interim results published on 12 April 2018, some initiatives have already converted into free cash.
As disclosed to the market at interim results time, Group Five does not believe it is prudent to rely solely on debt and would therefore prefer to approach shareholders to discuss recapitalisation options and replacement of its debt as soon as practically possible.
The repayment of the Bridge Funding through shareholder funding options such as a potential rights offer or shareholders’ loans would prevent the unintended disposal of core Group assets, providing the Group with sufficient time to stabilise and further de-risk the Construction businesses prior to any transaction in this segment in terms of the agreement reached with the government of the Republic of South Africa (“the VRP”) on transformation in the construction sector.
The Group will, in due course, engage with shareholders and present various options for their consideration to identify the best course of action for financial support.
Corporate Adviser and Transaction Sponsor
Tamela Holdings Proprietary Limited
Attorneys
Werksmans Attorneys
Sponsor
Nedbank Corporate and Investment Banking