VSquXred Business Rescue presentation

1. Opportunities
> Different types of distressed assets
> Pre-business rescue, during business rescue and after business
rescue – focus today is on during business rescue
> Many successful business rescues have resulted from some form
of investment
> Business rescue is a creditor driven process
> Distressed investment environment in South Africa is young and
undeveloped
> Business rescue legal framework offers protection and “space to
put together a deal”
> Practitioner (neutral and independent) takes the deal to
stakeholders – avoids, or at least mitigates, the dangers of the
over or under selling to stakeholders by management or board.
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2. Challenges
> Its not ordinary M&A - very technical from a legal
perspective
> Can be litigious - militant creditors
> Regulatory environment in South Africa is a deterrent
> Within business rescue it is emphasised --> clock speed (the
potential discount for an 'intact asset' makes up for the pain)
> All stakeholders’ interests need to be balanced to avoid
failure due to litigation and/or unnecessary delays and/or
'no' votes
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3. Southgold Exploration Pty Ltd
> PCF providers -
> Standard Chartered
> Credit Suisse
> Combined Exposure R2.6b - secured
> Why business rescue?
> Care and Maintenance costs - approximately R200m for
South Africa only
> Other creditors –
> Noteholders - R1.0 billion
> Trade creditors - R0.3 billion
> Inter-company / shareholders loans - R7.0 billion
> Total - R11b
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4. Southgold Exploration Pty Ltd
> Business rescue practitioner appointed –
> BRP legal team – business rescue legal, M&A legal
> JP Morgan - Transaction advisory
> KPMG - financial modelling, creditor verification, advisory
> Terra consulting - valuations
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5. Southgold Exploration Pty Ltd
> Regulators and government –
> DMR (6 to 7 months)
> Competition com (2 weeks for the Witsgold deal, 3.5
weeks for Sibanye/Witsgold deal)
> DWAF
> NNR
> SARS (more than a year to settle)
> SARB
> Local municipal and community structures
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6. Southgold Exploration Pty Ltd
> Witsgold offer –
> R75m on deal closure
> Fixed repayment schedule to lenders for R600m over
current LOM
> R1.2b flex payment schedule to lenders based on FCF
> Further R680m to lenders based on 10% FCF participation
over any additional LOM (if any)
> Option to settle without penalty
> 36 month interest moratorium
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7. Southgold Exploration Pty Ltd
> Witsgold bought an asset which swallowed an initial investment of
R11 billion before it went into rescue for approx R1.9 billion (PV)
> Discount - 83%
> Duration - 21 months
> Level of complexity - extremely complex
> Various jurisdictions - Switzerland, English, Canada, United States
of America
> Canadian CCMA and Receivership
> USA Chapter 11 proceedings
> Time zones - conference calls with callers on various time zones -
(worst was Vancouver, NYC, Toronto, London, JHB, Zurich,
Singapore, Beijing) - it’s a killer
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8. On Digital Media t/a Top Tv
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> PCF providers –
> shareholders stopped funding - had nothing
> approached creditors
> secured creditor - DBSA consent (DBSA R200mil exposure)
> monthly subscription fees
> business 'as usual' - trading entity
> Other creditors –
> IDC -approx R900 million total exposure
> NEF - R100 million
> trade creditors - R400 million
> Total - approx R1.4 billion

9. On Digital Media t/a Top Tv
> Business rescue practitioner appointed advisors –
> business rescue legal team – business rescue legal, M&A legal
> KPMG – valuation
> ODM CEO - domain expertise
> ODM CFO – finance and modelling
> Regulators and government –
> ICASA
> DOC
> Competition commission (deal did not require approval,
investigations into anti-comp behaviour by Multichoice)
> SARB (claims bought by ST)
> Electronic Communications Act (ECA) - limitation on foreign
ownership of a broadcast license
> New BEE consortium (still confidential)
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10. On Digital Media t/a Top Tv
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> StarTimes offer –
> R45 million to trade creditors (15c/R)
> R30 million to DBSA
> existing shareholders kept in but severely diluted
> new BEE
> split into 2 companies - broadcast company, services company
> further investment of R1 billion in business plan

11. On Digital Media t/a Top Tv
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> StarTimes have invested in an asset which swallowed an initial
investment of R1.4bil before it went into rescue for approx R106
million
> Discount - 92%
> Duration - 20 months and counting
> Level of complexity – extremely complex (but for other reasons)
> politics and agendas
> rogue offer (MSG Africa backed by Multichoice)
> litigation
> regulatory - DOC, ICASA, SARB
> cross-border and cross-cultural issues
> virtually every major supply contract has been re-negotiated
> almost all technical platforms have been migrated (uplink stations, fibre links, play-
out facilities, redundancy systems)

12. Summary
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> Business rescue can keep an asset whole as opposed to non-
business rescue solutions
> Big becomes, complex and becomes expensive - underlying
value is essential
> Time consuming and resource hungry
> Deep discounts are made possible
> Ultimately builds goodwill with stakeholders
> Young law - experienced advisors and business rescue
practitioners are essential and also scarce
> Every business rescue presents its idiosyncrasies - there is no
'cookie cutter' approach
> Regulatory environment and other laws do not speak to BR 
need to know how to navigate the 'waters‘
> PCF remains a challenge and will do so until distressed
investment (debt and equity) market develops

13. THE ROLE OF WERKSMANS
AS LEGAL ADVISOR
Eric Levenstein, Director