SUBSTANTIAL capital needed to support Virgin Active through pandemic lockdowns has forced its major shareholder Brait to go to the market for a R3 billion rights issue.
Mauritius-registered investment company Brait has announced a R3bn rights issue to reduce debt and execute on its strategy of realising maximising value of its investments over the medium term and returning capital to shareholders.
Brait shareholders could subscribe for up to 3 000 000 exchangeable bonds to be issued by subsidiary Brait Investment Holdings (BIH) in the ratio of one bond right for every 440 existing Brait ordinary shares held.
Brait said yesterday that the proceeds raised would be used to materially reduce the revolving credit facility (RCF) of Brait Mauritius (BML), together with an extension of the RCF to June 2024. This would provide “sufficient flexibility to execute in an optimal manner ... the stated strategy …” Brait’s board said yesterday.
The board said the coronavirus-related under-performance of Virgin Active had required significant shareholder capital contributions.
Brait had funded its 80 percent share of these contributions, utilising the BML RCF, resulting in a drawn balance of R4bn and available cash and liquidity of R0.5bn.
“This has necessitated a comprehensive funding solution for Brait to optimise its exit programme, whilst maximising optionality for shareholders,” the board said.
Brait’s share price slipped 8.6 percent to R4.14 yesterday morning on the JSE.
The exchangeable bonds, which will carry a fixed coupon of 5 percent, will be listed on the Main Board of the JSE.
BML is the main operating company in the group, and the reduction in debt of the RCF will save it some R200m in interest for calendar year 2022, and provide an improved liquidity position. The group had already secured commitments of R2.7bn for the capital raise.
In the six months to September 30, Brait’s net asset value per share increased 3 percent to R8.14 compared with R7.90 for the 2021 financial year.
This was after a continuation of Premier’s strong operational and financial performance - its 2022 first-half earnings before interest, tax depreciation and amortisation was up 20 percent year-on-year, driven by volume increases and price inflation. Premier is a leading, fast-moving consumer goods manufacturer in South Africa.
The investment in Virgin Active continued to recover from coronavirus-induced lockdowns with all clubs now open and operational.
In the UK, New Look’s strategy had resulted in a significant turnaround in profitability.
The group had R0.5bn in cash and facilities available at the end of the interim period, which was expected to increase to R1.3bn post the rights offer.
Since March 2020, milestones on Brait’s strategy included the disposals of Iceland Foods and DGB, resulting in a R2.8bn reduction in debt, a strong performance by Premier driven by sales volume and operational efficiencies, implementation of a restructuring plan for the Virgin Active UK business, and a Company Voluntary Agreement (CVA) concluded for New Look.
Other achievements included a debt restructure and covenant relief, together with shareholder support agreed for Virgin Active South Africa, a strong recovery in Consol’s performance, the reconstitution of the Brait board and a more than R500m reduction in Brait’s operating costs, the board said.
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