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Phumelela – Business Rescue Latest

All the meetings and what's happened so far

Turffontein

An update to Phumelela Gaming & Leisure Limited shareholders on Business Rescue and an advice of the withdrawal of their ongoing cautionary announcement has been published on SENS.

A summary is as follows:

1      On 8 May 2020, Phumelela Gaming and Leisure Limited (“the Company”) entered voluntary business rescue and appointed Mr John Evans as business rescue practitioner. On the same date, trade in the Company’s shares on the JSE was suspended.

2      On 13 May 2020, the Company concluded a written post-commencement finance agreement with Mary Oppenheimer Daughters Proprietary Limited (“MOD”), in terms of which MOD has agreed to provide loan finance of up to R100 million to the Company, during business rescue.

3      On 21 May 2020, the first meeting of employees was held. As a result of the nationallockdown, the meeting was held via videoconference in three sessions. The employees of the Company have elected to form a committee of employees’ representatives, in accordance with section 144(3)(c) of the Companies Act, 71 of 2008.

4      On 22 May 2020, the first meeting of creditors was held via videoconference. A copy of the presentation made to creditors is available at:

Phumelela.com

5      On the same day, a meeting was held with creditors, in terms of section 143(3)(a) of the Companies Act, to consider and vote on the remuneration of the business rescue practitioner, Mr Evans. At the meeting, creditors voted to approve the remuneration of Mr Evans.

6      A meeting of shareholders will be held in due course to, inter alia, to consult on development of a business rescue plan and to consider and vote on the remuneration of Mr Evans in accordance with 143(3)(b) of the Companies Act. Shareholders will be duly notified of the date and venue or electronic platform of the meeting.

7      Although shareholders will be updated as further material information becomes available, the Company publishes updates regarding the business rescue process on its website at:

http://www.phumelela.com/Business-Rescue-Updates/Updates

Withdrawal of cautionary announcement

Shareholders are referred to the cautionary announcement released on SENS on 8 April 2020, which is hereby withdrawn.

Shareholders will be updated once the suspension of trading in  the Company’s shares on the JSE has been lifted.

  • SENS – 27 May 2020 – 10h27

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13 comments on “Phumelela – Business Rescue Latest

  1. Pops says:

    So Brendon,as soon as the gates crash open ,is it buy buy buy @ 0.40c?

  2. Preston says:

    The share will open up much higher than 41c considering two of the unknown variables are actual now known variables. Short term liquidity has been restored and the govt has now reduced the systemic risk of the other unknown variable to Zero by allowing horse racing 🏇🏿 to proceed. The funding model of Phm is supported by a strong and loyal customers base and the 250 basis point drop in repo rate will provide some disposal income for the punter.

  3. Brendon says:

    @Pops,

    Let me start of by saying the market (investors that make up the free-float) very rarely get it wrong when the share price decline is profound and sustained over an extended period of time. The value they ascribe to the company is more realistic that what the balance sheet reflects.

    As at 31 Jan 2020, Phumelela indicated that its Total Assets were valued at R1,63 bn and the Total Liabilities was R788m (Net Asset Value of R842m). The market capitalisations on the JSE is R42m (based on 41 cents per share). The question one needs to ask is WHAT DO THE FREE-FLOAT INVESTORS KNOW IN RELATION TO R842M (NAV) VS R42M (Market Cap)?

    Phumelela’s Total Assets will require substantial impairment if it is unable to restart racing and sustain (generate sufficient betting turnovers and margins) itself in the coming days. Pre-Covid, Phumelela’s business model failed to generate sufficient betting turnovers and margins. The impact of Covid will no doubt contribute to Phumelela breaching material agreements and licence conditions. The valuation of Phumelela’s Total Assets may in the coming weeks be a shadow of the R1,63bn recently disclosed.

    Additionally, I expect the Total Liabilities that lands up on John Evans’ desk is closer to R1,3bn vs the R842m, on account of Post-commencement finance, Stakes Agreement liabilities, Severance liabilities, other claims and liabilities (none of which is included in the R842m). The bottom line is that creditors will have to take a major haircut for Phumelela to survive (closer to 85 cent in the Rand), and that is if Phumelela can find equity investors to back an entirely new business model (with a substantial equity injection). If creditors take a haircut then the 41c shareholder is holding a share that has no value.

    Majority of businesses (that supply essential goods and services) are going to struggle to trade out of the impact of Covid-19, bearing in mind that pre-Covid they ran profitable businesses. It’s absurd to expect Phumelela to trade out its current predicament, given their pre-Covid unsuccessful business model and the dependence on strong revenues from punters to kick-start and sustain the same business model in the coming days.

    When racing resumes, all the operators are going to take strain as their punters’ spend will no longer resemble pre-Covid levels. Are the operators right sizing and re-positioning their business models accordingly or are they just expecting a different result? We know the answer to this!

    Pops, without dispensing any advice, let me end by saying goodbye and not goodbuy.

  4. Jim says:

    brendon the discount to nav is massive so how does it close ? you suggest liabilities are understated by 400 so that makes nav 440 ish. still 400 over cap. in your opinion would 400 be a correct impairment ?

  5. Rod Mattheyse says:

    i need a little help with some arithmetic:

    How many hours @ R4600 p/h does R20 million buy?

    How many hours @ R4600 p/h does R100 million buy?

  6. Cecil Pienaar says:

    About 47 and 4 thousand and 300, minus, no times 5 for part two

    LoL 😅

  7. Brendon says:

    @Jim,

    The correct impairment amount would normally be determined independent of the value (or valuation) of liabilities. If the carrying amount of an asset (normally original cost of the asset less depreciation & impairments to date) exceeds the amount to be recovered through its use or the divestiture of the asset, then the carrying amount of the asset must be impaired to reflect the net realisable value.

    Phumelela’s new auditors would definitely be looking at the impairment test calculations closely given the substantial losses incurred by the business over the past 2 years. In the absence of Phumelela tabling a formidable business case to support a turnaround of the recent negative earnings, the auditors will insist that assets (carrying values) are impaired to reflect its reduced earnings capacity.

  8. Rod Mattheyse says:

    The pre-ordered bespoke rubber stamp is about to ink the papers – Read All About on the JSE Sens

  9. Phumelela Gaming & Leisure Limited(Incorporated in the Republic of South Africa)(Registration number 1997/016610/06)Share code: PHM ISIN: ZAE000039269(“Phumelela” or “the Company”)NOTICE TO CONSULT IN TERMS OF SECTION 150(1)OF THE COMPANIES ACT71 OF 20081.

    Shareholders are referred to the announcement released on SENS on 15 June 2020,wherein they were advised of the approval for an extension of time from creditors to publish the business rescue plan to 31 July 2020

    2.Notice is hereby given that the Business Rescue Practitioner of the Company, John Evans,will consult with shareholders on Friday, 10July 2020, at 14h00 using electronic means on Zoom.

    3.Shareholders wishing to participate in this electronic consultation meeting should contact the company secretary, Ms Freda Moloi, by email at [email protected] their details by no later than Thursday, 9July 2020 at 17h00.

    The company secretary is obliged to validate such requests and confirm the identity of the shareholder and thereafter, if validated, provide the link for the electronic consultation.

    4.AGENDA FOR THE MEETING:
    4.1To consult with the Business Rescue Practitioner regarding the development of a business rescue plan;

    and 4.2

    To seek approval of the additional fees of the Business Rescue Practitioner.

    5.Shareholders will be required to vote using the attached voting proxy.

    Annexure A

    An additional fee, as contemplated in Section 143 (2) of the Act, will be calculated as follows:

    •Conditional on the first meeting of creditors being duly convened and held, the business rescue practitioner will be paid an additional fee of R2,600 (including vat) per hour (in effect increasing the hourly rate of the BRP from the statutory rate for a medium company of R2 000 per hour including vat to normal commercial rates of R4,000 per hour, excluding VAT).

    The additional fees will be backdated to commencement of business rescue and will persist for the duration of business rescue;

    and•

    The business rescue practitioners will be paid a percentage of all amounts recovered for the benefit of creditors and shareholders if a business rescue plan is adopted calculated as follows:

    o1% of the value of total dividends paid to creditors, where the distributions paid to creditors amount to an aggregate of R200m;

    o1.5% of the value of total dividends paid to creditors, where the distributions paid to creditors amount to an aggregate of R400m;

    o2% of the value of total dividends paid to creditors, where the distributions paid to creditors amount to an aggregate of R500m;

    oro2.5% of the value of total dividends paid to creditors, where the distributions paid to creditors and shareholders, amount exceed the aggregate of R500m.

    The additional fees will be paid to the business rescue practitioner on or before the termination or completion of business rescue proceedings

  10. Rod Mattheyse says:

    Expensive rubber – Bridgestone and Dunlop must be scurrying around trying to find stock for the formula 1 season

  11. Rod Mattheyse says:

    So 57% of shareholders decided to vote – 65% of those like 4600 per hour .

  12. Preston says:

    @Rod M I voted in accordance with your guidances which you posted on the 28th of May 2020.

  13. Rod Mattheyse says:

    Preston – unfortunately the minorites are going to get hammered here. The Bridgestone deal will take care of the of the 65% of the 57%.. Although not directly related to this matter but more generally Shareholder protection is this country and especially JSE listed companies is a joke.

    Directors are kings and gods and when they use shareholder money to pay practioners and lawyers to enforce it its sickening.

    back to this matter one of the first communications was one about authority to do a deal – time may reveal the deal was set up before we even knew Mr Evans name – i hope im wrong.

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