Listing to give Sharemax debt holders relief
Thousands of mostly elderly creditors who sank more than R4bn into property company Sharemax, may soon receive some financial relief if a planned JSE listing of a R2.25bn property portfolio by Sharemax successor, Nova Property Group, is realised in 2017.
“Listing on the JSE will provide debenture holders with tradeable shares, as opposed to waiting for the historical scheme to run its course, which could take another five years,” Nova Property Group MD Dominique Haese said on Friday.
Nova hoped to list its property portfolio on the JSE before the end of 2017, she said.
Haese will this week issue 20,000 debenture creditors with a 60-page circular, seen by Business Day, outlining Nova’s proposal to convert them to equity holders in a JSE-listed company and, in so doing, capitalise debt owed to them by Nova.
Eyebrows will almost certainly be raised over the listing, considering the group’s historical ties to failed property syndication scheme Sharemax.
In the years since Sharemax’s 2010 collapse, the Financial Advisory and Intermediary Services Ombud has slapped huge fines on financial advisers, who wrongly sold the high-risk investment to elderly investors.
Nova creditors, on the other hand, are likely to welcome news of a listing. Many of them are pensioners who stopped receiving interest payments from the property company in December, as it sought to deploy more cash into its assets.
“We have been wanting to go into the listed environment for the longest time; it’s the only way you can really unlock value,” Haese said. “If we had to exit [debenture holders] today, they would probably get 50c in the rand. That is the reality of where we are.”
A R400m equity injection from an as-yet-unnamed investor would help Nova complete upgrades on its 18-odd retail properties including the mega Villa Retail Park in Pretoria, and return money to debenture holders, Haese said.
The listing would provide liquidity to debenture holders, who now could not trade their debentures, said Nova director, Connie Myburgh.
In terms of the proposed scheme of arrangement, debenture holders will receive shares totalling 34.45% in the listed entity, based on a conversion formula that takes into account the underlying properties in which they are invested and the total value of the group.
The mystery shareholder will receive a 15.43% stake in the listed entity.
In an interview with Business Day, Haese and Myburgh were at pains to distance themselves from Sharemax, saying
that neither of the scheme’s masterminds, Willie Botha and Andre Brand, had ties to Nova.
Nova Property Group was established in 2011/2012, in consultation with the Reserve Bank, to take over Sharemax’s property assets and avoid liquidations. At the time, it implemented the “historical scheme” in terms of which the vast majority of Sharemax investors elected to take up debentures in Nova and receive income on these.
Only about 2,000 Sharemax investors elected to take up shares in Nova, on which they have received no dividends, due to outstanding payments to debenture holders. Debenture holders’ claims against Nova totalled R1.68bn, based on the fair market value of properties owned by them, according to Haese. These claims would fall away once the company was listed and the debenture holders converted to equity holders.
Nova’s seven directors may have to contend with questions over their 43.21% stake in the listed entity, which share they will be getting for free. This is because, in terms of the historic scheme, these directors, who include Haese and Myburgh, received nearly 97% of Nova Property Group at no charge, due to the decision by most Sharemax investors to receive debentures rather than shares in Nova. This arrangement was made clear in the historic scheme circular, Haese said.
Since the listed company is anticipated to have a net asset value of about R2.65bn, following the R400m cash injection, this would give a notional value to the directors’ stake of about R1.1bn.
“We’ve taken the pain on this for eight years,” Haese said.