Rebosis cuts losses, dumps UK mall owner for R700

Rebosis Property Fund, founded by East London entrepreneur Sisa Ngebulana, has finally let ailing UK mall owner New Frontier Properties go, saying that it will sell its stake in the group for next to nothing as it battles to survive.

Rebosis said on Friday it was technically in breach of its debt covenants with South African banks, but it was in negotiations with them, and none of the financial institutions had called in their debt.

Rebosis, which was the first black-owned and managed fund to list on the JSE in 2011, has run into a host of problems in the past two years, and has been offloading assets to reduce debt and win back investor support.

It announced that it would sell its 49.4% stake in New Frontier for only R700 (about £40).

Rebosis is among a long list of SA retail and property companies whose investments in the UK have come unstuck since the country surprisingly voted in a 2016 referendum to leave the EU, the world's biggest and richest trading bloc. That created widespread economic uncertainty and depressed consumer and business confidence.

The risk of a recession in the UK is the biggest since 2007, the Resolution Foundation think tank said on Sunday, partially blaming Brexit and a weakening global economy.

“The board of directors of Rebosis is of the opinion that the shareholding in New Frontier has been one of the reasons for a depressed Rebosis share price, due to the challenges New Frontier is facing, being declining shopping mall valuations in the UK as a result of, among other matters, Brexit,” it said on Friday.

The landlord’s share price slumped to just 74c on Friday from highs of more than R13 in February 2017. In another statement on Friday, New Frontier said it would probably be forced into administration if it lost the support of its lenders.

Rebosis said it would sell its New Frontier stake, held via seven of its subsidiaries, for a total consideration of R700, or R100 a subsidiary. The buyers are Edwin Henry Dednam and Orion Hotels & Resorts (Africa).

Rebosis’s carrying value of its investment in New Frontier consists of a direct investment value of R109m, a loan to New Frontier of R180m and a vendor loan of R65m.

The company said it would fully impair these amounts in its results for the year to August 31 2019. It will also cancel the remaining cross-currency swap. In 2015, Rebosis bought 62% of New Frontier for R1.2bn.

A spokesperson at Rebosis said perceptions about New Frontier “were very negative and management decided the best move was to let [it} sell its interest in the UK group which had already been written down to zero on its balance sheet”.

Fund managers said Rebosis’s exit from New Frontier was inevitable. “The New Frontier challenge was something which needed to be resolved,” said Stanlib portfolio manager Ahmed Motara.

Jay Padayatchi, executive director at Meago Asset Management, said Rebosis was working through its toughest period since listing. He said the intrinsic value of Rebosis and its assets continued to exceed its market cap, and efforts must be directed towards unlocking shareholder value as opposed to just resolving debt breaches.

“The affected South African banks must work closely with management to enable this pioneer BEE property vehicle to recover from its UK setback as its assets in SA remain sound.”

New Frontier said on Friday that it had a loss for the nine months to end-May of £60.1m (R1.1bn), from a £4.3m profit previously.