The Nova Property Group believes the Companies and Intellectual Property Commission’s (CIPC’s) newest compliance discover, which bans the Sharemax rescue car from promoting any extra properties, is flawed and can take it on review.
In a complete media assertion launched on 15 August 2022, the group stated it will abide by its phrases pending the final result of the review course of. “We have consulted our legal team, and they are in the process of drafting papers to review the latest compliance notice. We accept that the latest compliance notice is, pending its review, binding, and we will abide by its terms.”
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Compliance discover
The compliance discover was issued in July, after it grew to become obvious that Nova had bought one other funding property, and after it had failed to repay the former Sharemax traders inside the ten-year interval prescribed in the Section 311 Schemes of Arrangement (SoA). (Nova’s board believes it has the authority to postpone repayments past this era, a view not shared by the CIPC or Nova’s former auditor. See beneath)
Moneyweb’s calculations reveal that since 2011, Nova has bought 19 of the 28 unencumbered funding properties it inherited from Sharemax. Since 2017 alone, Nova has bought ten procuring centres for round R360 million, of which solely R110 million was returned to traders.
This could have been necessitated by a gradual deterioration of Nova’s monetary place over the previous few years, and it experiencing vital money move issues.
Nova’s auditors warned in opposition to its solvency way back to 2017.
The auditors additionally expressed considerations that the firm was utilizing the proceeds of the sale of properties to fund operational bills relatively than to return it to debenture holders.
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Sale of properties
Nova says in the August assertion that the sale of the properties was to the good thing about debenture holders.
It stated the properties had been bought when their potential to generate earnings deteriorated to such an extent that the proceeds may very well be used extra productively by upgrading and creating different properties in the portfolio.
This was performed to improve the worth of those properties to give the debenture holders a greater final result than if the properties had been retained.
“Nova is satisfied that it has managed to unlock optimal value over the past 12 years, for nearly every class of debenture holder debt linked to the above disposed of properties, by having strategically redeployed the proceeds and allowed for capital growth to bridge the gap between an inherited ‘bad property’ and being able to pay relevant debenture holders enhanced percentages, up to 100%, of their historical investment, in instances where the property was disposed of for far less.”
Challenges
Nova says it adopted this method as the group confronted varied challenges, “limiting its ability to access external funding”. These challenges embody adverse perceptions stemming from its hyperlink to the failed Sharemax scheme and “unjust, negative and even incorrect media reporting”.
This, in accordance to Nova, resulted in the group being unable to supply exterior funding. One instance is {that a} funding line of R200 million was withdrawn due to “continued incorrect and negative Moneyweb reportage”.
This resulted “in many funding lines, equity partnerships, including a proposed listing of Nova in 2019, all key to value enhancement and resultant debenture payments, not coming to fruition. As an example, Nova had, on more than one occasion, secured funding lines in excess of R200 million only for such to be withdrawn” due to the antagonistic reporting.
External funding
Furthermore, the group states that the debenture compensation will rely on whether or not Nova can acquire exterior funding.
Nova claims that regardless of struggling to entry funding, it managed to develop its asset base from R2.2 billion in 2011 to R2.7 billion in 2021.
It provides {that a} “cursory reading” of its annual monetary statements (AFS) signifies that it has the property to repay debenture holders however that the compensation of debentures” is sadly taking longer than initially deliberate and projected.”
It additionally acknowledged that it had repaid debentures at 100c in the rand. (According to Moneyweb calculations, Nova has repaid R176 million.)
However, Nova fails to point out that its most up-to-date AFS, for its monetary yr to the finish of February 2021, obtained an antagonistic audit opinion. Such an audit opinion means the auditors didn’t imagine the monetary statements had been a good reflection of the firm’s monetary place.
The auditors additionally believed the valuations for a number of properties had been overstated.
(Nova wants to publish its monetary statements for the yr to the finish of February earlier than the finish of this month, which might reveal the firm’s present monetary standing.)
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‘Investors have not lost everything’
Nova additionally acknowledged that “contrary to continued incorrect and malicious reportage by Moneyweb”, debenture holders haven’t “lost everything.”
Nova says it’s in the strategy of creating undeveloped land. “Funding is currently being sourced, post which, sales teams will be engaged to market these projects. Simultaneously, successful tenders will be finalised to contract with various construction and development teams,” the assertion reads.
Nova doesn’t state that it inherited the undeveloped land from Sharemax again in 2011 and that it has not been developed subsequently.
Read: How former Sharemax traders ‘saved’ Connie Myburgh
‘Misunderstandings’
Nova additionally refers to a number of ‘misunderstandings’ in the assertion.
It says the firm had the discretion to postpone the compensation of debenture holders past the ten years set out in the SoA. “The 10-year period was a projected period based on circumstances prevailing at the time of the structuring of the SoA. Payment of debentures may be made at any time, depending on circumstances, in order to achieve payment to the best extent possible.”
Nova additionally notes that it doesn’t have to repay the whole R4.6 billion the 18 600 traders put into Sharemax, however relatively the quantities “equating to the fair market value of relevant properties”. These quantities are a lot decrease.
Nova additionally stated it was not arrange solely for repaying debenture holders however would proceed to commerce after the debenture was settled.
Capital development
Nova additionally included data reflecting its calculations of the mixture capital development worth enhancement for all courses of debentures between 2012 to 2020.
Nova additionally included a desk in the press assertion reflecting its calculations of the capital development achieved associated to the debentures linked to the properties that had been bought.
Nova’s clarification of the desk:
- Many of the disposed of properties have achieved full cost of the traditionally invested funds to their related Debenture Holders. (Green Blocks in Table)
- Optimal worth, by means of the redeployment of the proceeds of the disposed of properties, has already been achieved, eventuating in the functionality of future cost of the full traditionally invested funds. (Grey Blocks in Table)
- Optimal worth enhancement nonetheless in course of. 86% of the focused optimum worth creation for full cost to these related Debenture Classes achieved to date. (White Blocks in Table)
Source: Nova
Nova’s conclusion in the press assertion was:
“The Nova Board is dedicated to persevering with constructing on the positives achieved over the previous decade. Nova is assured that it has performed every little thing in its energy, to securing for its debenture holders and stakeholders the very best worth creation.
“Nova is looking forward to completing the historic restructuring process, with maximum benefit to its debenture holders and stakeholders.”