Business rescue practitioner, George Nell on Wednesday filed a notice of termination of business rescue proceedings with the Companies and Intellectual Properties Commission (CIPC) after concluding that “there are no longer reasonable grounds to believe that the [companies are] financially distressed”.
The termination of business rescue proceedings comes a few weeks after Bridge and Onecor creditors voted to accept a compromise plan aimed at saving Bridge – which is additionally liable for the claims of Onecor creditors – from liquidation. In order for the plan to progress, Bridge needed to be removed from business rescue.
In terms of the plan, creditors – currently debenture holders – will be converted to preference shareholders and Bridge will buy back their shares when profits allow.
The fact that creditors have swapped debentures for shares has an immediate impact on the company’s insolvency, according to Nell, suggesting that this is largely why the companies are no longer considered financially distressed.
Whereas interest paid on debentures is fixed in terms of a contract, share payouts are dependent on how much profit a company makes. In other words, Bridge’s liability shrunk overnight and the more profit Bridge makes the more rapidly creditors will receive their capital back.
The now preference shareholders of Bridge and Onecor will receive a 1% per-annum dividend on their investments (from a previous 19%) paid monthly, with payments expected to start in January 2016.
While creditors have accepted the compromise plan via a vote and restructuring is underway, Bridge could still be liquidated if the turnaround is unsuccessful.
“We are not ready to give up on Bridge and our investment in Bridge and will therefore do whatever we need to in order to avoid a liquidation and all that comes with such a drastic step,” said interim Bridge CEO, Ryneveld van der Horst in a video sent to creditors before the plan was voted on, appealing to them to support the plan.
Following the suspension of Bridge CEO, Emile Aldum in March, Van der Horst was appointed interim CEO of Bridge. Van der Horst is CFO of 1Surance, a funeral cover provider led by Emile’s brother Maritz, who is also a director of Bridge.
Creditor Frans Badenhorst has been appointed co-CEO of Bridge for a period of four months in terms of the plan. Badenhorst has more than 25 years experience in the unsecured lending industry, according to Bridge.
Bridge management are currently developing three new products, including an asset-backed loan offering, interest free loans and cash-back loans.
The microlender says it will cut monthly expenses from R11 million to R5.8 million, by “right sizing” the business and that a Cape Town-based hedge fund is providing it with R40 million in funding over the next eight months.
Bridge’s debtors’ book is currently valued at between R154 million and R186 million, significantly below the R1.6 billion owed to 1 600-odd Bridge and Onecor investors, mostly Afrikaans pensioners.
‘Wrongdoings will be acted on’
Following certain findings indicating that there may have been financial irregularities committed by the Aldums in their management of Bridge, the plan makes provision for a forensic audit by independent forensic auditor, Andre Prakke.
“If the Aldums have shuffled money legally or illegally, we want to know. This is not going to be swept under the carpet,” Dr Reuphillan Kasselman, chairperson of Bridge’s creditors’ committee, told Moneyweb earlier this week.
“Any wrongdoings found will be reported to the board and acted on,” said Van der Horst.
“With the right people on board, with the right people making the operations work, I believe we can only do so much better,” Kasselman maintains.
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