Profits nosedive at troubled Bridge

Shellshocked Bridge investors will now receive a 1% per-annum dividend, instead of the 12%-19% they’re accustomed to.

A rescue plan – aimed at staving off certain liquidation – may yet save the firm, but it includes a lot of pain for investors.

Shellshocked Bridge investors will now receive a 1% per-annum dividend, instead of the 12%-19% they’re accustomed to, if a compromise plan aimed at rescuing the business from liquidation goes ahead.

The dividend will be paid monthly and payments are expected to start in January 2016.

Risk aversion

Bridge was placed into business rescue late last year after risk aversion to the unsecured lending sector – exacerbated by the collapse of African Bank in August 2014 – meant it failed to secure institutional funding.

Business rescue practitioner George Nell says he will consider a forensic report on the company’s financials before seeking legal opinion on whether he should file for the termination of business rescue proceedings. A decision should be made this week.

In terms of the new plan, creditors – currently debenture holders – will be converted to preference shareholders. Bridge plans to buy back their shares when profits allow, probably from 2018.

Whereas interest paid on debentures is fi xed in terms of a contract (and in Bridge’s case represents a R1-billion liability), share payouts are dependent on how much profit a company makes.

Chairperson of the creditors committee Reuphillan Kasselman says the plan will put an end to the expensive business rescue process.

Improving efficiency and “right sizing” the business, based on the smaller loan book, will cut monthly expenses from R11 million to R5.8 million, Kasselman says. The value of the debtors’ book was between R154 million and R186 million.

Last month, 80% of creditors voted in favour of the compromise plan, which includes a settlement with the Aldum family, controlling shareholders until recently.

When accounting for interloan accounts and the Aldum’s own debentures, there is a R24-million loan still owing to the Aldums by Bridge that has been offset to zero.

The Aldums now hold a 29% stake in Bridge.

Creditor Maurizio Decinti believes the compromise plan protects the interests of the Aldums to the detriment of creditors. Decinti personally invested R5.5 million into Bridge and significantly more on behalf of others.

Kasselman counters that the compromise plan provides independent forensic auditor Andre Prakke with a mandate to perform an investigation.

“If the Aldums have shuffled money legally or illegally, we want to know,” she said.

“If any evidence comes up from Prakke’s report, the right steps will be taken, and if that entails giving evidence to the Hawks then that is what we are going to do,” says Kasselman. “But if the Aldums didn’t steal money, that must also come out.”

Moneyweb did not receive a response from the Hawks on the matter before publishing.