Information for Nova debenture holders

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Moneyweb’s editor, Ryk van Niekerk, published an article of interest to those who invested in Sharemax, and hold debentures in Nova.

There is currently a proposal for a Section 155 Scheme of Arrangement, which would see the current debentures converted into shares in a company which, as Van Niekerk points out, may never list on the JSE.

He lists four major problems, which are briefly summarised below.

  1. Debenture holders will see a significant dilution of the value of their investments, while losing the preferential rights they currently have via their debentures. The dilution varies for the classes of debentures. Debentures and their dilution are linked to the original Sharemax properties the investors invested in. The biggest losers will be those who have invested into the Villa and Zambezi, who would only receive 15% and 20% of their original investments. An investment of R1 000 000 in the Villa would be reduced to around R145 000.
  2. The Nova board hails the listing as a silver bullet for former Sharemax investors to receive shares in a JSE- listed company, as they would be able to trade these shares and realise at least a portion of their initial Sharemax investments. The reality is that it is not clear whether the JSE will allow Nova to list in its current form.
  3. There is no commitment from the founding shareholders to transfer properties. Nova went to great lengths to explain the conversion process for debenture holders, but doesn’t say a word in the scheme documents of how the scheme will affect the directors’ shareholding in the company that actually owns the properties.
  4. There is no independent fair and reasonable assessment to inform debenture holders that the proposal serves their best interest, in the view of Van Niekerk. Moneyweb believes that the proposed Section 155 Scheme of Arrangement is brought under the wrong section of the Companies Act, and that it should have been brought under Section 114. The major difference is that under Section 155, it is not necessary to commission a fair and reasonable assessment, while it is compulsory under Section 114.

If you, or your clients, are affected, it makes good sense to read the full article prior to the debenture meeting on Friday at 10h00 at the CSIR conference centre in Pretoria. There are also links to other articles of great importance to those affected.