South African and UK investors looking to buy Ster-Kinekor with R250 million loan

Ster-Kinekor Theatres (SKT) could receive funding in the form of a R250 million senior debt facility, following a proposal from investors, Blantyre Capital and Greenpoint Capital.

According to the Business Rescue Practitioner, the offer forms the foundation of Ster Kinekor’s Business Rescue Plan, which was published on 28 February 2022.

The facility will fund future operations, facilitate the exit of business rescue and refinance the existing capital structure.

Conditions of the transaction stipulate that existing shareholders would transfer their Ster-Kinekor ownership to Blantyre and Greenpoint capital.

This would result in Blantyre and Greenpoint Capital obtaining full ownership of Ster-Kinekor’s equity.

“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,” business rescue practitioner, Stefan Smyth, said.

Ster-Kinekor will benefit from the transaction, assuming the creditors vote for it, in a sense that its 776 employees would receive better job security, and SKT will have a robust growth platform.

The Rescue Plan, if successfully adopted and implemented, will see funds distributed as per Section 135 of the Companies Act and estimates:

• Secured creditors, namely RMB secured debt to receive a package of payments/forms of settlement;
• This includes the RMB Covid-19 loan facility, which is to receive an upfront 50% recovery in the full and final settlement;
• Trade Creditors, including landlords, to receive 5c in the Rand whereby their primary benefit is the ongoing trading of SKT and the ability to earn future profits from this relationship;
• Landlords who were instrumental in providing post commencement funding (“PCF”) assistance will receive dividends as trade creditors plus full repayment of the PCF.

The Rescue Plan will only be adopted if 75% of holders of creditors’ voting interests and 50% of independent creditors’ voting interests are obtained.

“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,” Smyth said.

According to Smyth, Blantyre and Greenpoint’s proposed deal raises more funding than if Ster-Kinekor were liquidated, and the Business Rescue Plan’s dividend would likely pay out faster.

Therefore, Ster-Kinekor’s suppliers can continue trading with the organisation.

Smyth explained that the opening up of cinemas and the release of more blockbusters is encouraging.

Ster-Kinekor announced in January 2021 that it would enter business rescue, primarily because the Covid-19 pandemic and subsequent lockdowns had damaged its business.

“Up until February 2020, Ster-Kinekor welcomed millions of moviegoers every year to their cinemas,” Ster-Kinekor said.

“As a result of the Covid-19 pandemic and the consequent economic lockdown instituted by the South African government at the end of March 2020, all cinemas were required to shut down, and only permitted to reopen under strict conditions as from the end of August 2020,” it added.

Level 4 and 5 lockdown regulations stipulated that facilities, including cinemas, must remain closed.

The cinema chain began reopening its theatres in July that same year following President Cyril Ramaphosa’s announcement that the country would move to level 3 lockdown.

Main Image; Centurion Mall