By Lara Kahn,Ryan Smith, Rainer Nowak, Leigh Lambrechts and Naledi Mbaba from Webber Wentzel
Webber Wentzel assisted and advised Ernst & Young's Stefan Smyth (business rescue practitioner) on a ZAR 250 million business rescue matter involving the refinancing and restructuring of Ster Kinekor’ s debt and the 100% purchasing of the Ster Kinekor shares by Blantyre Capital Limited and Greenpoint Specialised Lending.
The Covid-19 pandemic, and resulting economic restrictions, presented various operational and cashflow challenges that adversely impacted many businesses, including Ster Kinekor.
In a pre-emptive move by the board of directors, an assessment was conducted to determine whether Ster Kinekor was in financial distress and whether a voluntary business rescue was the best course of action in light of the financial pressure caused by the government-imposed economic lockdown in 2020.
The board of directors, after considering an array of factors, including the impact of the pandemic, resolved that the company should commence business rescue proceedings.
As a result, Ster Kinekor commenced business rescue on 27 January 2021. This decision was appropriately timed, allowing Ster Kinekor to experience a period of relief while proceedings were underway.
The timing of this decision also ensured that the business rescue proceedings commenced while Ster Kinekor was still rescuable.
Ster Kinekor received an offer from Blantyre Capital Limited, an English investment firm, and Greenpoint Specialised Lending, a specialist private credit investment management firm, headquartered in Cape Town which informed the business rescue plan.
The business rescue plan was published on 28 February 2022 and adopted by the requisite percentage of creditors and shareholders on 10 March 2022.
Webber Wentzel assisted and advised Ernst & Young on all aspects of the business rescue proceedings.
The main transaction had a deal value of ZAR 250 million and involved the refinancing and restructuring of Ster Kinekor’ s debt, as well as the purchase of 100% of Ster Kinekor’ s shares in by Blantyre Capital Limited and Greenpoint Specialised Lending.
The firm assisted with the negotiation and preparation of the main transaction documents, attending to stakeholder management, and negotiating leases in respect of Ster Kinekor’ s 57 cinema sites across Southern Africa.
There were several challenges related to obtaining approval for the transaction from the Competition Commission and South African Reserve Bank which resulted in inevitable delays.
The business rescue team also experienced delays in the landlord negotiations, as a result of inter alia, the complex landlord arrangements and the negotiation and renegotiation of deals with approximately 20 different landlords in total.
It must be noted that all of the above occurred while Ster Kinekor continued trading, which it initially did during the ever-changing lockdown regulations and which at one stage resulted in a complete shutdown of the business. This was also exacerbated by insurance-related issues, adding further complexity to the matters already at hand.
The conclusion of the above transaction facilitated Ster Kinekor’ s successful exit from business rescue on 31 October 2022, maximised recoveries to creditors of the company as opposed to a liquidation scenario, ensured continued employment of staff and refinanced existing capital structures.
The success of this rescue is owing to the hard work of the Ernst & Young team, the Ster Kinekor management team and the legal team, and the timeous voluntary commencement of business rescue proceedings by Ster Kinekor.
Lara Kahn, Partner, Ryan Smith, Partner, Rainer Nowak, Director, Leigh Lambrechts, Senior Associate and Naledi Mbaba, Candidate Attorney at Webber Wentzel.
The Webber Wentzel core transaction team assisting Ernst & Young comprised Lara Kahn, Ryan Smith, Rainer Nowak, Leigh Lambrechts, Hugo de Villiers, Robert Wilson, Clare-Alice Vertue, Sikelelwa Ndaliso, Saleem Firfirey, Mirren Sharp, Naledi Mbaba, Navresh Tangur, Imaan Sayed, Nick Robb, Peter Grealy and Carla Collett.
The other advisers on the deal were White & Case and Baker McKenzie who acted for the investors.