Ster-Kinekor receives R25m ‘handover’ offer

Popular cinema chain Ster-Kinekor has received R25 million in funding from investment firm Blantyre Capital and private credit investment management firm Greenpoint Capital for a 100% handover of the business.

The group announced in a statement that the transaction will include the transfer of its shares which will result in the full ownership of its equity by the investors.

Ster-Kinekor, South Africa’s largest cinema operator, has been in business rescue since January 2021, after the initial financial fallout from Covid-19-related trade restrictions and a drop in cinema audience numbers.

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In December last year, the group requested that the deadline for the publication of its business rescue plan be extended to January 2022.

A similar request was instituted by the company in October 2021, proposing that the publication of the plan be extended to November 2021 as it was in discussions with the investors regarding the investment offer.

Ster-Kinekor says the funding will facilitate its much-needed exit from the business rescue process as it has been struggling to recover financially from the impact of Covid-19.

The funding will also support its future operations and reform its existing capital structure.

“The [funding] facility provides the quickest and most efficient manner to exit Ster-Kinekor from business rescue and return it to solvency,” says Stefan Smyth, the group’s business rescue practitioner.

He adds that the funding also seeks “to maximise recoveries to pre-business rescue and ongoing trading creditors of the business”.

According to Ster-Kinekor, the business rescue plan will see funds distributed in accordance with Section 135 of the Companies Act, should it be successfully accepted by creditors and implemented.

The new funds will go to:

• Secured creditors, namely Rand Merchant Bank (RMB) secured debt, which is 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, are to receive 5c in the rand, whereby their primary benefit is the ongoing trading of Ster-Kinekor 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.

“If successfully voted on by the creditors, the transaction will provide much-needed security to the 776 employees currently employed at Ster-Kinekor,” the group says.

“It will also return the company to solvency and provide a growth platform for Ster-Kinekor, underpinned by a strengthened balance sheet which should provide [for] the business to regain lost growth during the pandemic and expand where feasible.”

Smyth adds: “If the plan is approved and implemented, the objective to restructure the Ster-Kinekor affairs, business property, debt and equity [in a way] that maximises the likelihood of the company continuing in existence on a solvent basis, will have been met.”

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The group says its early February weekly attendance performance is edging towards pre-holiday season levels following the release of blockbuster films such as Superman, Encanto, Scream 5 and Sing 2.

The release of further blockbusters is expected to set the tone for the cinema’s group’s recovery and see it regain its entertainment position locally.

Smyth called on creditors to vote in favour of the business rescue plan by March 9, 2022.

Palesa Mofokeng is a Moneyweb intern.