SOUTH African movie goers can breathe a sigh of relief as the potential end of Ster Kinekor’s business rescue could be in sight after business rescue practitioner Stefan Smyth revealed yesterday Blantyre Capital, in partnership with Green Point Capital, had offered to buy the movie business with a R250 million senior secured debt facility.
Ster Kinekor creditors get to vote on a business rescue plan (BRP) by March 9.
Ster Kinekor, which holds some 65 percent of the cinema market in South Africa, filed for business rescue in January 2021 after the business was decimated by the Covid-19 pandemic.
The offer forms the basis of the BRP that was published on February 28. In December, Smyth announced an updated offer by Blantyre Capital and Green Point Capital for the movie firm.
As part of the transaction, the shares in Ster Kinekor would be transferred from the existing shareholders to the investors, which results in full ownership by Blantyre and Greenpoint Capital of the equity in Ster Kinekor.
Blantyre Capital is a London-based special situations investment firm, while Green Point Capital is a Cape Town-based specialist private credit investment management firm.
“The facility provides the quickest and most efficient manner to exit Ster Kinekor from business rescue and return it to solvency, whilst also seeking to maximise recoveries to pre-business rescue and ongoing trading creditors of the business”, said Smyth.
This comes as South Africans return to movie theatres post-Covid. Early February, weekly attendance performance appeared to have returned to pre-holiday season levels, which were good, the BRP noted.
Films like Encanto, Scream 5 and Sing 2 remained in the top five films every week. Led by Spider-Man, these block busters were meeting and exceeding their weekly forecasts, with management expecting them to continue to pull in movie goers ahead of anticipated forecasts, Smyth said.
With the continued opening up of cinemas and the release of further blockbusters, Smyth said he was encouraged that Ster Kinekor would regain its entertainment position across South Africa.
He added that if the BRP was successfully voted on by the creditors, the transaction would provide much-needed security to the 776 employees currently employed at Ster Kinekor It would also return the company to solvency and provide a growth platform for Ster Kinekor, underpinned by a strengthened balance sheet, which should provide the business to regain lost growth during the pandemic and expand where feasible.
The rescue plan, if successfully accepted by creditors and implemented, would see funds distributed in accordance with Section 135 of the Companies Act and estimated that secured creditors, namely Rand Merchant Bank (RMB), secured debt to receive a package of payments or forms of settlement.
This included the RMB Covid-19 loan facility, which was to receive an upfront 50 percent recovery in full and final settlement.
Trade Creditors, including landlords, were to receive 5c to the Rand whereby their primary benefit was the ongoing trading of Ster Kinekor and the ability to earn future profits from this relationship.
Meanwhile, landlords who had provided post commencement funding (PCF) assistance would receive dividends as trade creditors plus full repayment of the PCF.
However, Smyth said for the rescue plan to be successfully adopted, the requisite percentage of 75 percent of holders of creditors’ voting interests and 50 percent of independent creditors voting interests must be obtained.
Additional rental documentation also needed to be concluded with landlords to finalise the new terms and to the extent necessary approval from the South African Competition Commission or other regulatory approvals.
Smyth said: “If the plan is approved and implemented, the objective to restructure the SKT affairs, business property, debt and equity that maximises the likelihood of the company continuing in existence on a solvent basis, will have been met.”
He added that the proposed business rescue plan dividend materially exceeded the estimated liquidation dividend, which would in all likelihood be paid out quicker than a liquidation dividend. This would enable Ster Kinekor suppliers to be able continue to trading with the company and generate future revenues and keep Ster Kinekor’s employees employed.
BUSINESS REPORT ONLINE