This time it is about Nova’s failure to meet obligations for Debenture Holder repayment protection required under the provisions of the Debenture Trust Deed – a document that forms part of the Insolvency Act Section 311 Business Rescue Plan documentation that was approved in the Courts and which conveys upon Nova a certain responsibility, which, it is now revealed, they have failed to execute
Read here:
www.carian.co.za/post/non-registration-of-the-covering-bond-by-nova- property-group-investments-pty-ltd-in-favour-of-the
What purpose do these protection mortgages serve?
They are an added layer of protection for the Debenture holders. The debentures themselves feature in the Annual Financial statements as a liability with the Debenture Holders collectively being a Creditor of the company
The covering mortgage – in which the Debenture Holders are the beneficiaries – is an extra layer of protection and in the event of non-repayment of the debentures, the mortgage beneficiaries obtain ” …a limited real right, ranking them as secured creditors ahead of unsecured creditors during liquidation”
The operative words are “secured creditors” meaning that under certain conditions, it secures for the debenture holders a preferential creditor – ‘first in line” – status for repayment in the event of say, liquidation if the company
But, even if the company remains in existence but fails to repay the debenture holders, they as the mortgage beneficiaries can enforce their right to attach the underlying property or other assets to realise the necessary funds to achieve repayment – but this would require a court application and favourable judgement
Triggers to enforce would include: failure to repay by a given deadline date (if any), insolvency or voluntary closure of the company and breach of any conditions set out in the mortgage and (probably) any of the underlying Debenture Trust conditions
In the absence of such covering mortgage, that layer of protection does not exist and the Debenture Holders become “just another creditor” with a non- preferential claim on, say, the insolvent estate
Perhaps following Tromp’s complaint to CIPC regarding the nonexistence of a covering mortgage for Flora Centre, it will be clarified as to whether or not this situation applies to all of the properties that Nova inherited out of the Sharemax Business Rescue Plan
But, even if mortgages do exist and an initiative is launched to sue for repayment, what assets exist to repay the outstanding 2.2.billion debenture value – as per the 2024 Annual Financial Statements (AFS)?
Here again we come up against the absence of the 2025 AFS – now eleven months after the August 31 2025 deadline for publication (no matter how much Nova argue about this and how much of what they have referred to as Debenture Holder funds they expend on getting supporting legal opinion for their stance)
In addition, the 2026 AFS publication deadline is just a month away and is unlikely to be published on time either
Getting back to assets available to realise funds to repay:
Firstly, in the Directors Report in the ’24 AFS the following is stated on the company being a “going concern”
“The consolidated and separate annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business”
A Google AI definition of Going Concern is “an accounting term for a financially stable business that will continue operating without the threat of liquidation for at least the next 12 months. Key aspects include financial stability, ongoing operations, and compliance with reporting standards.”
That describes Nova? Yeah, Right?
And, as in the Director’s Report: “Presumes”????
The inclusion of this word strongly indicates that as at 28 February 2024 (already and going back in time), the company was not a going concern (however much “presumes” might just be standard terminology usage in AFS production?)
Presuming that in the future, all will be rosy, is once again the usual empty promise that regularly emanates from the company directors in their very infrequent communications
So, as Nova CEO Haese states that Tromp’s activities are not in the best interests of the Debenture Holders, is the revealed and reported failure by the company to ensure that the covering bonds for Flora Centre – and all of the other classes of Debenture? – are actually registered also a case of “not in the best interests” of the same Debenture Holders?