Ster Kinekor (business rescue) press release

1 March 2022

Ster Kinekor receives offer from Blantyre Capital and Greenpoint Capital for 100% ownership

The Business Rescue Practitioner announces that Blantyre Capital and Greenpoint Capital (‘the investors’) have proposed to fund Ster Kinekor Theatres (‘SKT’) with a R250 million senior secured debt facility. The facility will fund future operations, facilitate the exit of business rescue and refinance the existing capital structure. The offer forms the basis of the Business Rescue Plan that was published on 28 February 2022.

As part of the transaction, the shares in SKT would be transferred from the existing shareholders to the investors which result in full ownership by Blantyre and Greenpoint Capital of the equity in Ster Kinekor.

“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 on-going trading creditors of the business”, noted business rescue practitioner Stefan Smyth.

If successfully voted on by the creditors, the transaction will provide much needed security to the 776 employees currently employed at SKT. It will also return the company to solvency and provide a growth platform for SKT, underpinned by a strengthened balance sheet, which should enable the business to regain lost growth during the pandemic and expand where feasible.

The Rescue Plan, if successfully accepted by creditors and implemented will see funds distributed in accordance with 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 full and final settlement

- Trade Creditors, including landlords to receive 5c in the Rand whereby their primary benefit is the on-going trading of SKT and the ability to earn future profits from this relationship.

- Landlords who were instrumental in providing much needed post commencement funding (“PCF”) assistance will receive dividends as trade creditors plus full repayment of the PCF.

In order for the Rescue Plan to be successfully adopted, the requisite percentage of 75% of holders of Creditors’ voting interests and 50% of independent creditors voting interests must be obtained. Additional rental documentation needs 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 noted, “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.

The proposed Business Rescue Plan dividend materially exceeds the estimated liquidation dividend, which will in all likelihood be paid out quicker than a liquidation dividend. This will enable SKT suppliers to be able to continue to trading with the company and generate future revenues and furthermore, importantly will also keep some 776 employees in their roles to their and their families’ benefit.

The Business Rescue Plan also highlights the potential liquidation dividend that creditors may receive in the event that the Rescue Plan fails to achieve the requisite vote and successful implementation, a situation which would lead to a much reduced dividend pay-out to secured creditors, zero dividend to concurrent creditors and shareholders and the winding up of the business.

From a trading perspective, early February weekly attendance performance appears to have returned to pre-holiday season levels, which were good. Films like Encanto, Scream 5 and Sing 2 remain in the top 5 films every week. Led by Super-Man, these block busters are meeting and exceeding their weekly forecasts, with management expecting them to continue to pull in movie goers ahead of anticipated forecasts.

With the continued opening up of cinemas and the release of further blockbusters, Smyth is encouraged that Ster Kinekor will regain its entertainment position across South Africa and calls upon creditors to vote in favour of the Plan by 9 March 2022.

ENDS

Louise Brugman 083 504 1186 on behalf of Business Rescue Practitioner, Stefan Smyth

Notes to editors

Founded in 1969, Ster-Kinekor Theatres (Proprietary) Limited (SKT) is a private company incorporated in South Africa, which currently holds some 65% of the cinema market in South Africa.

The business was materially impacted by COVID-19 pandemic especially the hard lockdown. A lack of new blockbuster content, due to delays in the release of such movies out of the UK and USA and the second national-lockdown in December 2020, a key period for revenue generation for the business, added further strain to the income-earning operations stream which severely affected the Company’s’ ability to pay its debts as and when they fell due.

These factors ultimately led the board of directors to conclude that the Company was financially distressed, resulting in the Board of directors passing a resolution for the Company to voluntarily commence business rescue on 26 January 2021.

Audited financial statements of the Company for the prior financial year ending 30 June 2021 have not yet been completed, but will be finalised on confirmation of the outcome of the Business Rescue Plan voting and implementation if applicable. The last audited set of financials relates to the year ended 30 June 2020