Rebosis withholds final dividend

Tie-up with Delta would help improve liquidity, rekindle investor support

Mthatha-born businessman Sisa Ngebulana’s Rebosis Property Fund said the weak economy has hit its tenants so hard it can no longer pay a final dividend. The group, whose share price has fallen 87% in 2019, has battled to grow rentals and is trying to sell assets to bring down its debt levels.

Mthatha-born businessman Sisa Ngebulana’s Rebosis Property Fund said the weak economy had hit its tenants so hard it could no longer pay a final dividend this year.

Since the group’s share price fell 87% in 2019, it has battled to grow rentals and is trying to sell some of its assets to reduce debt levels relative to its asset base.

It had to write off its investment in UK mall owner New Frontier Properties, losing R2bn earlier this year, after the subsidiary’s underlying assets were devalued.

Rebosis is in talks with Delta Property Fund on a proposed merger that would help both companies improve their liquidity and win back institutional investor support. Rebosis said in May that while it would not pay an interim dividend, it would still pay a depleted dividend for the financial year.

But it said on Monday on the JSE’s stock exchange news service (SENS) that it had decided not to declare a final dividend, given its high gearing levels, pressure on valuations and current engagement on the proposed merger that would give rise to an optimised capital structure.

Delta and Rebosis also said in a joint statement on Monday that they would need to raise capital for their merger to proceed.

Ngebulana, CEO of Rebosis, was unavailable for comment.

He and his team are in talks to dispose of some properties to ease their debt burden. Rebosis last reported its loan-to-value (LTV) at 57%.

Most fund managers want property counters to have LTVs of 30%-35%. “The board is further cognisant of progress made in disposals of properties which will assist significantly in the deleveraging process, but is conscious not to erode value in accelerating the process,” Rebosis said.

“The result is that the board deems it prudent and in the best interest of the company, and the future merged entity, not to declare a distribution,” it said.

The share prices of Delta and Rebosis have been battered in so far in 2019, losing 76.22% and 87% respectively.

The parties said in August they were in talks to merge. The benefits of this would include a reduction in capital costs through credit-profile enhancement, while the scale of the new entity would also allow for a restructuring of the parties’ balance sheets.

The companies have completed a preliminary due diligence, but they are expected to release a circular to shareholders detailing a share swap merger only next year.

“The parties have to date completed a preliminary due diligence on the respective companies which included review of forecasts and an optimal capital structure for the proposed merged entity.

“The structure includes the anticipated funding gap required in order to achieve acceptable gearing levels for a proposed merged entity,” they said.

They have engaged large shareholders and funders to obtain support for a capital raise that should contribute to lowering gearing.

Rebosis’s share price closed 9.38% higher at 35c, while Delta Property Fund gained 1.9% to R1.07.

PARTIES COMPLETED A PRELIMINARY DUE DILIGENCE ... WHICH INCLUDED A REVIEW OF FORECASTS AND AN OPTIMAL CAPITAL STRUCTURE

PROGRESS MADE IN DISPOSALS OF PROPERTIES ... WILL ASSIST SIGNIFICANTLY IN THE DELEVERAGING PROCESS