Moneyweb’s Ryk van Niekerk – Nova teetering on the verge of insolvency – What you need to know.

Moneyweb’s Ryk van Niekerk  has published an article today titled “Nova teetering on the verge of insolvency” – see www.moneyweb.co.za/news/companies-and-deals/nova-teetering-on-the-verge-of-insolvency/

It paints a gloomy picture from a DC standpoint although despite the interpretations and conclusions of the author, the Nova directorate state that the company is in a healthy state.

At NDCAG we take their protestations with a pinch of salt and we anticipate that all DC’s will probably feel the same.

Along with the implied possibility that the company could go into liquidation in the near future, there is a snippet of news in the article that piques our interest.

It is stated that the company sold a property during the 2017 financial year and that three more properties have been sold this year –  “Checkers Virginia for R36.4 million and … subsequent to year-end, three additional properties were sold for R284.5 million…Silverwater Crossing, Benoni Hyper, and properties related to Brookfield Investments.

This begs the question: Will the proceeds of those sales be used to pay out the relevant Debenture Creditors (if they were indeed sold for an amount that meets or exceeds the total of the DC investment)?

It might be logical to expect that payouts for the four properties will be according to the relevant Schemes or Arrangement and their timetables.

Alternatively, will the sale proceeds be ring-fenced (and protected?) until the defined time that the payouts should take place?

Should DCs be optimistic either way? We know what happened with the sale proceeds of Rivonia Square which, according to Nova’s circular issued at the time, the proceeds were to be ring-fenced and allowed to grow – whilst still paying DCs a monthly income – until such time as it had accumulated sufficiently to enable payout to the DC investors.

When they stopped the income payments for Rivonia Square in November 2016 no mention was made in their circular to the affected DCs of the fate of the Rivonia sale proceeds and DCs have been left to draw their own conclusions and/or to believe the various stories and allegations that float around.

It is perhaps significant that the Board has issued no communication to the DCs regarding the latest sales and so we suggest that DCs should not be optimistic regarding payouts anytime soon if at all and perhaps, DCs should expect that the sale proceeds of the four properties will also “disappear” a la Rivonia Square.

This brings us to why the NDCAG was established and re which, a short story:

A Debenture Creditor (DC) called in to NDCAG on 29 November. He told us that he’d called the Frontier offices earlier in the day and ended up speaking with a person (name not recorded but apparently, not a  member of the management or the directorate) who advised that “payouts will be made and will take place over time and up to 2022”

What does this mean?

Is there a definite and operative (or soon to be operative) plan to commence payouts? Are these payouts a “new arrangement” outside of the Schemes of Arrangement or are they only to be effected in terms of the provisions of the various Schemes of Arrangement and their timetables?

Can our caller be expected to deduce the correct answer from the rather superficial information give to him?

Can our caller be criticised if he interprets the answer received as a definite intention to commence payouts soon?

If there is a new arrangement being implemented in the near future, when will Nova publicise it? Given the plight of so many of the DCs, many of whom were wiped out by the shut-down of the property syndication industry by the Financial Services Board, would Nova not want to announce the new arrangement as quickly as possible and thus, at the very least, give the DCs some hope?

That they have not publicly announced a payout scheme as was inferred by our caller, leaves us to deduce that the Nova employee who interacted with the caller was really just fobbing him off with a vague reference to a payout scheme that probably is in fact, only that contained in the Schemes of Arrangement

In any event, Nova is allegedly so broke (and seemingly confirmed in the Monwyweb article) that they couldn’t pay out even if they wanted to

Referring again to the plight of so many of the DCs does Nova not have an obligation to be precise when called upon for information on payouts by persons who call their offices? Should such calls be handled by relatively junior and ill-informed employees of the company? Should such calls not be dealt with by a senior and responsible office of the company (the Information Officer)?

NDCAG was established to become a representative body for the DCs. This is why we call for all DCs to register with us via our website at www.ndcag.co.za and in the process to give us their mandate to speak and act on their behalf. With a significant membership, we look to persuade the Nova Board to recognise us.

Acting on behalf of NDCAG member DCs (and in effect, all of them), we look to interact with the Nova Board and amongst other things at least be able to distribute clear and precise information to our members not only regarding payout programs or changes to same, but any other information that affects the DCs.

Please feel free to respond to this posting via email to [email protected]

We will do our best to respond promptly.

Yours in the Cause!

 

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