The Nova Property Group has suspended interest payments to debenture holders due to the group’s inability to obtain bank funding to fund its property management operations at the various property developments. The interest payments were suspended from November 1.
Following recent Moneyweb reports, Moneyweb has been inundated with calls from debenture holders regarding the suspension of debenture payments. From the interaction with debenture holders, it seems as if all interest payments to qualifying debentures were suspended, which includes debentures related to the Rivonia and Silverwaters properties.
Moneyweb offered an opportunity to Nova CEO Dominique Haese to provide some clarity regarding the suspension of the interest payments. She did not offer any details regarding the suspension but said that “all relevant debenture holders have been fully informed in our normal communication process”.
She added that debenture holders can contact the Nova call center at 012 425 5000 or visit the website of Frontier Asset Management at www.frontieram.co.za.
Haese previously suspended all communication with Moneyweb, as she is unhappy with our recent reports on various aspects of Nova’s operations, most notably the 87% of Nova shares the directors received for free and how the directors tried to keep this secret. (See the statement at the bottom of this article.)
In a letter dated November 3 that Nova sent to debenture holders, Haese says the decision to suspend interest payments was taken as the group could not secure external funding to upgrade and maintain underlying properties.
Haese wrote in the letter: “This deceleration in the flow of external funding and the rate at which upgrades, maintenance and the placement of tenants has to be done can currently not be synchronised and the Board had to once again take the difficult, but strategic, decision to cease current monthly return payments which are being paid to holders of certain classes of debentures, until the funding situation from external sources improves.”
This means that the Nova board will seemingly retain profits and cash earned from these properties to fund maintenance and upgrades at other properties.
Nova has on numerous occasions blamed negative media coverage, which includes reports from Moneyweb, as a major reason why banks are reluctant to extend loans to the group. Apparently, the banks are influenced by media articles and fear there is substantial “reputational risk” associated with doing business with the Nova group.
During a meeting between Moneyweb and the Nova board, when the board revealed its shareholder registers, Nova chairman Connie Myburgh even referred to a photo that was used alongside a Moneyweb article, which he claimed prompted a bank to withdraw from funding negotiations.
Ironically, this article and photo were about the Constitutional Court’s decision that denied the directors of Nova leave to appeal against an earlier Supreme Court of Appeal judgement. This ruling, which brought an end to a legal battle that lasted for more than three years, found that Nova could not refuse Moneyweb access to its shareholder registers.
Cash flow pressure
The suspension of interest payments is not really a surprise, as an analysis of Nova’s 2016 financial results (which ended in February 2016) shows that Nova has some cash-flow pressures.
The company’s operational activities saw a cash outflow of R27 million in the 2016 financial year. The board did manage to acquire external funding of nearly R54 million, which left the group with cash resources of R42 million at the end of February this year.
The Nova board also disclosed in the 2016 statements that the group managed to secure a loan of R31.5 million from Nedbank. Interestingly, the directors, in their personal capacity, provided limited surety on this loan.
If the board cannot secure more bank funding, the board may be forced to sell some of the properties to raise cash, as the group did between 2013 to 2015. These disposals raised cash of around R285 million.
Annual general meeting
Nova held its annual general meeting on Wednesday in Pretoria. It was attended by around 20 of the 2 000 minority shareholders. Moneyweb requested permission from Nova chairman Connie Myburgh to attend the AGM, but he did not respond. A similar request from Carte Blanche was denied.
During the meeting, Myburgh approved all the resolutions, including a resolution on executive remuneration, with 100% of the vote. The four board members – which include Myburgh and Haese – own 91% of the voting rights in Nova via a nominee company and approved their own salaries. The remaining 9% of the voting rights reside with existing and former senior managers within the Nova group.
Response from Dominique Haese, CEO of Nova:
Dear Mr van Niekerk,
It is regrettable that our efforts in engaging Moneyweb openly, constructively and in a bona vide fashion has not been reciprocated. In response Moneyweb has chosen to publish articles without prior reference to us, and in breach of your undertaking to allow us to see and comment on the articles first, which articles twist the facts, articulate a number of inaccuracies and untruths and seek to slander and defame the Nova Group and its directorate. We are considering our position and our rights in this regard are reserved.
It has become clear to us that any information that is provided by us to Moneyweb, will be twisted and used out of context for the purpose of further negative reporting of and concerning the Nova Group and its directorate and given that no further productive purpose would be served in engaging with Moneyweb, the Nova Group has decided to break off all forms of communication with Moneyweb. We will accordingly no longer respond to questions Moneyweb pose to us, requests for commentary on proposed articles or for that matter to any articles that Moneyweb might publish, subject of course to a reservation of the right to deal with any matter Moneyweb might publish, in a court of law.
Please ensure, should you elect to publish anything further regarding the Nova Group and any of its functionaries, that you include in such publication our above position, verbatim.
CEO Nova Property Group
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