Real estate investment trust (Reit) Rebosis has entered business rescue following the board’s decision that the group is financially distressed in terms of the Companies Act, 71 of 2008. The JSE has further granted the company its approval for the suspension of trading in its ordinary shares and A-ordinary shares with immediate effect.
This comes after the group on 1 August announced that it would give an update on restructuring initiatives that would aid its balance sheet and unlock value in the business.
It noted in a Sens statement issued on Friday that its management and board deemed its 6-month cashflow vulnerable to significant risks including:
- Expected timeframes within which shareholder approval could reasonably be obtained on the disposals
- The impact of a rising interest rate cycle on servicing debt costs
- The inability to recover increased municipal costs from sovereign tenants and, the high costs of rates and taxes levied by some municipalities
- The continuous delay of rental payments by certain national and provincial government departments
- Municipalities which contribute in excess of 50% to its revenue
Rebosis says that the South African Reserve Bank’s indication of more interest rate hikes means that the best option, to ensure its survival, is to commence business rescue and implement a business rescue plan as contemplated in Chapter 6 of the Companies Act.
The Reit is yet to appoint its business rescue practitioner (BRP).
It noted that the JSE granted its request on the basis that:
- The board will no longer be in control of the group, save for such residual powers and control it may have in terms of the Companies Act
- The board is not able to confirm whether Rebosis will be able to comply with the JSE Listings Requirements
- With the material discussions to be undertaken with all stakeholders during the business rescue process, the risks of leaks of price sensitive information are high, which could result in different levels of information in the market
- The nature and extent of the restructure in terms of an approved business rescue plan, and its effect on the value of the group is unknown
- It is uncertain which of the group’s assets will be retained and on what basis
The Reit says its management and board formulated a turn-around strategy, which could be incorporated by the BRP, and focused on two areas; addressing the group’s balance sheet constraints and ongoing operational focus on leasing alternatives to reduce vacancies and to increase tenant retention. It notes that central to this strategy is to place an initial total of 25 assets, comprising of 23 commercial buildings and two retail centres, on the market for disposal.
The board says it considers its decisions to be prudent and in the best interests of the shareholders, while the group and its BRP develop and implement the business rescue plan.
Nondumiso Lehutso is a Moneyweb intern.