REG - Grit Real Estate Inc - Accretive resolution to Drive In Trading structure

Grit Real Estate IncomeAnnouncement

30/11/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221130:nRSd9979Ha&default-theme=true

RNS Number : 9979H  Grit Real Estate Income Group  30 November 2022

 GRIT REAL ESTATE INCOME GROUP LIMITED

 (Registered in Guernsey)

 (Registration number: 68739)

 LSE share code: GR1T

 SEM share code: DEL.N0000

 ISIN: GG00BMDHST63

 LEI: 21380084LCGHJRS8CN05

 ("Grit" or the "Company" and, together with its subsidiaries, the "Group")

 

 

ACCRETIVE RESOLUTION TO THE GUARANTEE AGREEMENT WITH THE GOVERNMENT EMPLOYEES
PENSION FUND OF SOUTH AFRICA, ALLOWING FOR GRIT'S OBLIGATIONS TO BE FULLY
DISCHARGED IN RELATION TO THE DRIVE IN TRADING STRUCTURE

 

 

The board of Directors (the "Board") of Grit Real Estate Income Group Limited
announces the signing of a variation to the Guarantee Agreement between the
Company and the Government Employees Pension Fund of South Africa ("GEPF"),
represented by Public Investment Corporation SOC Limited ("PIC"), allowing for
the Drive in Trading (Pty) Ltd ("DiT") structure to be wound up and the
Company's obligations under the Guarantee Agreement (described below) to be
fully discharged.

 

The existing Guarantee Agreement only provides inter alia for the sale of
23.25 million Grit Ordinary Shares owned by the DiT ("DiT Security Shares") on
the open market. The addendum to the Guarantee Agreement (the "Addendum")
enables the Company to take direct ownership of their proportionate number of
DiT Security Shares in exchange for making the US$17.5 million Guarantee
Agreement payment to GEPF/PIC, and for PIC to similarly add its DiT Security
Shares to its existing shareholding in the Company.

 

Following these steps, the Company's obligations under the Guarantee Agreement
will be fully discharged and the potential market overhang in the Ordinary
Shares of Grit on either the London Stock Exchange or the Stock Exchange of
Mauritius will be removed.

 

Bronwyn Knight, CEO of Grit Real Estate Income Group Limited, commented:

"We are pleased to have agreed an accretive resolution to the winding up of
the Drive in Trading structure, whilst fully discharging Grit of its
obligations under the Guarantee Agreement and removing a market overhang. On a
30 June 2022 pro forma basis, the combined impact of this transaction would
have delivered an increase in the Company's EPRA NRV from the last reported
US$79.4 cps to US$80.5 cps.

 

Final implementation of the transaction is expected upon South African
regulatory approvals in early 2023 and the LTV impact of the transaction is
expected to be offset by proceeds received by Grit from deferred rental
collections and asset sales already concluded in 2022."

 

Further Background:

 

South African legislation on Black Economic Empowerment ("BEE") was applicable
to the Company whilst still listed on the Johannesburg Stock Exchange. DiT,
the Group's BEE consortium, obtained cost-effective third-party debt financing
for Grit Ordinary Shares in 2017 by pledging its 23.25 million Grit Ordinary
Shares subscribed for at that date, and on the strength of an additional
US$35.0 million credit guarantee directly from PIC. Separately, PIC and Grit
agreed that Grit would make PIC/GEPF whole for 50 per cent. Of any potential
losses suffered by the PIC/GEPF under their credit guarantee, up to a maximum
of US$17.5 million (the "Guarantee Agreement"). The transaction was approved
by Grit shareholders at that time.

 

In August 2020, the GEPF became the lender to DiT as a result of their credit
guarantee being called. In anticipation of the DiT structure being unwound,
the parties concluded that the Guarantee Agreement only provided inter alia
for the sale of DiT Security Shares through the open market, in a process that
would be under the control of PIC, and which would be expected to introduce
volatility to the Grit share price. Accordingly, the Company and PIC have
signed an Addendum that enables the Company to take ownership of DiT's
proportionate number of DiT Security Shares in exchange for Grit paying
US$17.5 million to GEPF/PIC under the Guarantee Agreement. The formula to
determine proportionate entitlements to DiT Security Shares is defined as
23,250,000 Ordinary Shares x US$17.5 million/DiT outstanding loan balance at
implementation date, capped at 11,625,000 Ordinary Shares. This payment by
Grit and the subsequent transfer to Grit of its share of the DiT Security
Shares will occur once PIC enforces its rights under the amended Guarantee
Agreement.

 

Following delivery of the DiT Security Shares to Grit, Grit intends to
repurchase the DiT Security Shares for a nominal value of US$0.01 per share,
utilising the Company's existing share buyback programme. The repurchased DiT
Security Shares will be held in treasury, not cancelled.

 

Following these steps, the Company's obligations under the Guarantee Agreement
will be fully discharged.

 

Further, PIC has indicated its preference to add its entitlement to DiT
Security Shares to its existing holdings in the Company (currently
representing approximately 17.09% of Grit's issued share capital), resulting
in the removal of a market overhang in the Ordinary Shares of Grit on either
the London Stock Exchange or the Stock Exchange of Mauritius.

 

As reported in the Company's annual report for the year to 30 June 2022, Grit
has already provided US$14.51 million in respect of the Guarantee Agreement,
being the Group's Guarantee exposure net of the expected value of its DiT
Security Shares. On a 30 June 2022 pro forma basis, the transaction would have
had an immaterial effect on Grit's income statement, while the combined impact
of the provision reversal and share buyback would have resulted in an increase
in the Company's EPRA NRV from the last reported US$79.4 cps to US$80.5 cps.

 

The cash funding of the US$17.5 million Guarantee payment would have resulted
in 30 June 2022 pro forma Group LTV increasing, however the collection of
prior year rent deferrals and asset sale proceeds already received post 30
June 2022 are expected to result in Grit's LTV remaining substantially
unchanged on implementation date.

 

The variation to the Guarantee Agreement is subject to South African
regulatory approval, which is expected to be obtained, and final closing
achieved during the first quarter of 2023.  A further update will be provided
once all conditions precedent relating to this transaction are cleared.

 

By Order of the Board

 

30 November 2022

 

FOR FURTHER INFORMATION, PLEASE CONTACT:

 Grit Real Estate Income Group Limited
 Bronwyn Knight, Chief Executive Officer                           +230 269 7090
 Darren Veenhuis, Investor Relations                               +44 779 512 3402

 H/Advisors Maitland - Communications Advisor
 James Benjamin                                                    +44 7747 113 930 / +44 20 7379 5151
 Alistair de Kare-silver                                           Grit-maitland@h-advisors.global

 finnCap Ltd - UK Financial Adviser
 William Marle/Teddy Whiley (Corporate Finance)                    +44 20 7220 5000
 Mark Whitfeld/Pauline Tribe (Sales)                               +44 20 3772 4697
 Monica Tepes (Research)                                           +44 20 3772 4698

 Perigeum Capital Ltd - SEM Authorised Representative and Sponsor
 Shamin A. Sookia                                                  +230 402 0894
 Kesaven Moothoosamy                                               +230 402 0898

 Capital Markets Brokers Ltd - Mauritian Sponsoring Broker
 Elodie Lan Hun Kuen                                               +230 402 0280

 

NOTES:

Grit Real Estate Income Group Limited is the leading and award-winning
pan-African impact real estate company focused on investing in, developing and
actively managing a diversified portfolio of assets in carefully selected
African countries (excluding South Africa). These high-quality assets are
underpinned by predominantly US$ and Euro denominated long-term leases with a
wide range of blue-chip multi-national tenant covenants across a diverse range
of robust property sectors.

 

The Company is committed to delivering strong and sustainable income for
shareholders, with the potential for income and capital growth.

 

The Company holds its primary listing on the Main Market of the London Stock
Exchange (LSE: GR1T) and a secondary listing on the Stock Exchange of
Mauritius (SEM: DEL.N0000).

 

Further information on the Company is available at http://grit.group/
(http://grit.group/)

 

Directors: Peter Todd+ (Chairman), Bronwyn Knight (Chief Executive Officer)*,
Leon van de Moortele (Chief Financial Officer)*, David Love+, Sir Samuel Esson
Jonah+, Nomzamo Radebe, Catherine McIlraith+, Jonathan Crichton+, Cross
Kgosidiile and Bright Laaka (Permanent Alternate Director to Nomzamo Radebe).

(* Executive Director) (+ independent Non-Executive Director)

 

Company secretary: Intercontinental Fund Services Limited

Registered address: PO Box 186, Royal Chambers, St Julian's Avenue, St Peter
Port, Guernsey GY1 4HP

Registrar and transfer agent (Mauritius): Intercontinental Secretarial
Services Limited

UK Transfer secretary: Link Asset Services Limited

SEM authorised representative and sponsor: Perigeum Capital Ltd

Mauritian sponsoring broker: Capital Markets Brokers Ltd

 

This notice is issued pursuant to the FCA Listing Rules and SEM Listing Rule
15.24 and the Mauritian Securities Act 2005.  The Board of the Company
accepts full responsibility for the accuracy of the information contained in
this communiqué.

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCBLBLTMTITBTT