Christo Wiese’s investment vehicle Titan has guaranteed an equity injection of up to R1.5bn in Brait, buying the company time to extract more value in Virgin Active and New Look before selling its stakes in them.
Brait’s recapitalisation plan included three-year extensions of the maturities of the company’s bonds to December 2027 and the repayment or settlement adjustment to its convertible and exchangeable bonds, Brait said in a statement on Monday.
Brait CEO Peter Hayward-Butt said that without the rights offer and extensions of the maturities, the company would have been forced into a Virgin Active and New Look fire sale.
“Broadly speaking Brait has two bonds that are outstanding. The exchangeable bond that is about R3bn and the convertible bonds which are about R3.5bn. They both mature in December this year,” said Hayward-Butt.
“When Brait started its journey five years ago, the strategy was to monetise the assets and return all the capital to shareholders. That strategy hasn’t changed,” he said.
“The fact of life is that Virgin Active and New Look were massively impacted by Covid. As you know, it was 18 months that Virgin was closed. The whole restructuring plan is to give Brait enough time to sell, as soon as we can, the assets in the optimal window and not forced to be a forced seller.”
Hayward-Butt said that he expected the sale of the assets in the next three years or sooner, depending on what would be in the interests of Brait’s shareholders at the time.
Titan owns about 30% of Brait. Brait values its 67% stake in Virgin Active at about R10bn and its stake in New Look at R1bn.
Vote of confidence
Hayward-Butt said that Titan’s decision to underwrite the rights offer was a vote of confidence in the business and allowed creditors to share the same confidence.
“Having a big co-shareholder come and underwrite the rights issue was a positive not just for the bond holders, but all the creditors of the business,” he said.
The company said that the proceeds of the R1.5bn rights offer would be retained for general working capital purposes and potential investment in existing portfolio companies and/or repayment of Brait Group debt.
There would also be an extension of the Brait Mauritius committed revolving credit facility to March 2028, with the facility limit increased from R600m to R1bn.
Brait has received irrevocable commitments from stakeholders to support the recapitalisation, including 80% of the holders of convertible bonds, 73% of the holders of exchangeable bonds and 43% of Brait ordinary shareholders.
The combined R900m reduction of the nominal value of the bonds reduced the company’s debt while the rights offer would strengthen the balance sheet and provide it with the requisite capital for general working capital purposes, potential portfolio company investments and liquidity to repay debt, said Brait.
After the recapitalisation, the group’s net debt is expected to reduce by R2.4bn to R3.7bn.
The rights offer is fully underwritten by way of secured irrevocable undertakings and/or underwriting commitments of R1.5bn from Titan Financial Services, represented by Wiese and his related entities.
Irrevocable
The rights offer would be priced and underwritten at a 25% discount to the theoretical ex-rights price of a Brait share and based on the volume weighted average traded price for the five successive days preceding the publication of this announcement, said the company.
Brait has secured irrevocable undertakings from Titan and other shareholders, which collectively hold 43% of the Brait ordinary shares, to vote in favour of the ordinary resolutions to be proposed at the extraordinary general meeting to be held on July 2 to approve the recapitalisation.
Giving an update on the performance of its assets, Brait said Virgin Active’s strong performance and operational turnaround had continued with performance across the territories above budget.
Brait will release its annual results on June 25.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.