Helmke Sartorius von Bach | Jul 1, 2020 | 0
Van Rooyen bails out van Rooyen
Trustco announced on Monday 08 October that investors should exercise caution when dealing in Trustco shares since it is near the conclusion of a loan agreement with its majority shareholder, and negotiations with its major lenders to restructure its debt.
A Stock Exchange News Service (SENS) bulletin issued by the Johannesburg Securities Exchange on 08 October 2018 referred shareholders to an earlier cautionary note issued late in September, advising shareholders that “discussions with several parties have progressed to such a level that the board is of the opinion that if it is successfully concluded, may have a material effect on the price of the company’s securities, and that shareholders dealing in the equities of the company should therefore exercise caution.”
Shareholders were advised that the Managing Director of Trustco Group Holdings, Dr Quinton van Rooyen, through his investment vehicle, Next Investments (Pty) Ltd, representing the Van Rooyen family, will provide a loan of up to N$1 billion to recapitalise the listed entity.
The current issued share capital of Trustco is 974,265,619 of which the Van Rooyen family owns 535,854,120 shares or 55% of the equity.
“The family will dispose of a portion of its Trustco Group Holdings Limited securities to investors that will include, but not be limited to institutions, individuals, corporates and existing shareholders to fund the Capital Amount,” according to the SENS announcement.
The Van Rooyen family will retain a significant controlling interest in the group. At the same time, following the sale of equity, the group’s share float will be increased, which the family believes will be to the general benefit of all shareholders.
The group has to repay the loan on 31 March 2024 according to an amortisation schedule published in detail in the SENS, listing all conditions that must be observed.
The Van Rooyen loan will be provided to Trustco as an unsecured subordinated shareholders loan but the group will pay the family monthly interest based on the prime bank rate of Namibia.
The jury is still out whether existing shareholders see the same value in the proposed transaction as the family does. A year ago, on 12 October 2017, Trustco traded at N$5.20 per share. The share price lingered around this level until 22 November 2017 when its first major break-out occurred.
Early January this year, Trustco shares traded at N$10 per share, gradually increasing in price until 31 August 2018 when it reached its all-time high of N$13.49 per share. It stayed near this level for just over two weeks trading at N$13.08 on 17 September 2018. Then a rapid slide started and on Wednesday this week, 10 October, Trustco has shed halve of its market value, trading at a year-low of N$6.80. On Thursday, the share stabilised and moved up a notch in a single trade to N$7.00.
As part of the negotiations between the group’s board and the Van Rooyen family, the latter has agreed to an option of refunding them, again with equity, but then at share prices that assume more than 200% growth in value up to 31 March 2020 and one thousand percent growth up to 31 March 2024.
According to the SENS, the larger part of the loan will be used to fund the group’s interests in its mining operations, in Trustco Bank for mortgages, and growing its student loan portfolio.
“A portion of the loan will be applied to the current debt restructuring of the group. The company is in the process of negotiating a formal capital standstill up to 15 June 2019 with the International Lenders Group. During the agreed capital standstill a formal debt restructuring agreement will be completed and finalised,” according to the SENS.
Trustco’s Namibian sponsoring broker is Simonis Storm Securities. The terms of the loan was approved by the board last Friday, 05 October 2018.
Share price graph from sharenet.co.za