Fund managers await action on Resilient's overhaul plans
BUSINESS LIVE /28 MAY 2018 - 06:31 / ALISTAIR ANDERSON
Fund managers are waiting for further details of what Resilient Reit’s new investment plans will be now that it has taken steps to respond to losing more than half its market value.
These will include restating financial results going back to 2017. The diversified property company has been the subject of a number of adverse market reports and has seen a sustained sell-down of its shares in 2018. The share price was down 2.3% to R55.60 on Friday after falling 63.22% year to date.
On Tuesday, Resilient said it would withdraw the cautionary on its shares. It also provided an update on various issues and explained that shareholders’ dividends would not be negatively affected.
Resilient said it had unwound its cross-share holding with its associate company, Fortress Reit. It also said that since a joint announcement on the JSE news service on March 7 by Resilient and Fortress, Resilient "had made progress towards addressing shareholder concerns and this [latest] announcement provides an update".
But not everyone is satisfied that Resilient has made itself clear. "Last week, Resilient announced it was making large changes, including restating financial results. This will have major effects on its dividend payouts. But there wasn’t an investor call or presentation or anything. I’d like to see what their plans are going forward. We understand the changes that have been made," Golden Section Capital analyst Garreth Elston said on Friday.
The cross-shareholding between Resilient and Fortress had been unwound by Resilient’s distribution of Fortress B shares on May 7. Resilient would also consolidate its broad-based empowerment scheme. This would cost some R1.7bn. Its Siyakha Education Trust would be repositioned as a BEE ownership vehicle that owned only Resilient shares and was funded only by Resilient.
Meanwhile, The Siyakha 2 Education Trust would be repositioned as a BEE ownership vehicle that owned only Fortress shares and was funded only by Fortress. Once this repositioning was implemented, the Siyakha Trust would be renamed the Resilient Empowerment Trust and the Siyakha 2 Trust would be renamed the Fortress Empowerment Trust, at which stage Resilient would terminate its involvement with the Fortress Empowerment Trust.
"On the assumption of a Resilient share price of R57 and a Fortress B share price of R14.50, the fair value of Resilient’s claim on loan account against each trust will result in an impairment totalling about R1.7bn," the group said.
The full amount of each loan would be due to Resilient and would accrue interest at an agreed rate.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER