SUSTAINABILITY THROUGH A WORLDWIDE CRISIS
The world was a different place at the beginning of this financial period. Namibia was suffering from a recession (and still is) which has only deepened during the pandemic. The changes sweeping the globe has left nobody – not even Trustco – untouched. It is during times such as these that you realise that no one can stand alone, and one is reminded that the support of your shareholders, directors, staff and stakeholders are critical to sustain oneself, as well as to explore the opportunities for wealth creation for stakeholders. Opportunities that will no doubt present themselves because of Trustco’s culture of innovation. Let’s review what happened and see how Trustco’s world has changed.
APRIL 2019: NAD 1 BILLION RELATED PARTY LOAN PROGRAMME / MEYA ACQUISITION AMENDED
Right at the beginning of the year, the group concluded the Related Party Loan Programme (NAD 1 billion), which was oversubscribed by NAD 270 million, and provided capital for the group’s continued expansion.
As a result, the Meya Acquisition Agreement was amended, with both the USD 25 million hurdle payment as well as the USD 20 million option price to increase Trustco’s holding in the Sierra Leonian mine to 65%, to be settled in a combination of shares and cash.
JUNE 2019: MEYA COMMUNITY DEVELOPMENT PROGRAMME / WARRANT AGREEMENT FACILITY
The Meya Community Development Programme was announced, allocating 0.25% of Meya’s gross revenue to its primary host communities.
Trustco also entered into a Warrant Agreement facility which has the potential to raise an additional NAD 2 billion
in capital for growth.
JULY 2019: HUSO TRANCHES EXECUTED / HERBOTHS DEVELOPMENT IN PRINCIPLE APPROVAL / MEYA MINING LICENCE ISSUED
The first two tranches of the Huso Agreement were executed after reaching the EBITDAASA targets, increasing Trustco’s share in issue by 240 400 000 shares. The Huso Agreement resulted in Trustco Resources acquiring a diamond operation.
The group obtained in principle approval for the Need and Desirability for the Township establishment on the Herboths development, a 2 605 hectare development on the outskirts of Namibia’s capital, Windhoek.
In addition, the National Minerals Agency of Sierra Leone issued Meya Mining’s large scale mining licence, allowing Meya to begin with the transition to commercial development and production and also concluding its acquisition as the final conditions precedent had been
fulfilled, with both hurdle components on the exploration results being met – these hurdles being an intrinsic value of at least 3 million carats or at an international market value of at least USD 1 billion.
SEPTEMBER 2019: GCR CREDIT RATING UPGRADE / UPLISTED TO OTCQX / WARRANT TRANSACTION FACILITY APPROVED
After the first six months of the financial period, Trustco’s GCR Credit Rating was upgraded to B+ long term and B short term with a positive outlook.
In New York, the group uplisted its ADRs to the OTCQX market, while locally, a general meeting approved the Warrant Transaction facility.
OCTOBER 2019: WARRANT CERTIFICATES ISSUED / HERBOTHS DEVELOPMENT APPROVAL / NAD 1 BILLION RELATED PARTY LOAN WRITTEN OFF / SEGMENT RESTRUCTURING
The first warrant certificates were issued and the partial exercise of these warrants occurred.
The Need and Desirability for Township establishment at the Herboths development was approved, paving the way for future development, as this allows for the subdivision of the property and installation of infrastructure, significantly increasing its value.
The NAD 1 billion related party loan to the group was waived. This further deleveraged the balance sheet of the group.
The group continued with the planned restructuring of its segments, with the insurance segment initiating the acquisition of the banking & finance segment, which includes both a banking and microlending licence, as well as a student loan book, and is valued at NAD 1.8 billion.
This will result in the new financial services segment.
NOVEMBER 2019: DISCUSSION OF ACQUISITION
With the insurance segment having initiated its restructuring in the prior month, it moved forward in discussions with Conduit Capital for a potential acquisition.
DECEMBER 2019: ACQUISITION OF CONSTANTIA INSURANCE FROM CONDUIT
The group announced that it would acquire Constantia Insurance from Conduit Capital for NAD 2 billion.
Constantia insurance is a 70 year old insurance company in South Africa, with assets of NAD 2.1 billion and reserves of NAD 700 million, with over 1 million retail clients and over 10 000 corporate clients.
FEBRUARY 2020: SALE OF HERBOTHS / AWAITING APPROVAL FOR RESTRUCTURING / HUSO TRANCHES EXECUTED
With the Need and Desirability for the Township establishment approved, Trustco announced the sale of Herboths to Constantia Insurance, while the group still awaited Bank of Namibia approval for the insurance segment’s acquisition of the banking and finance segment.
The final three tranches of the Huso Agreement executed after EBITDAASA targets were reached, increasing Trustco’s issued shares by 388 400 000 shares.
MARCH 2020: COVID-19 IN NAMIBIA / CONDUIT ACQUIRES FINANCIAL SERVICES / RESOURCES NEW MINORITY SHAREHOLDER AND SALE OF OPTION / DIRECTORS AND AUDITORS RESIGN / SHARES ISSUED TO STAFF / FINANCIAL YEAR END CHANGE
During this month, COVID-19 was first encountered in Namibia. First Trustco, then Namibia goes into lockdown as a state of emergency is declared.
The acquisition of Constantia Insurance was amended, with Conduit Capital now acquiring the financial services segment for NAD 10.4 billion, post acquisition of the banking and finance segment. This will be settled by the issue of Conduit Capital shares, which are also listed on the JSE.
In addition, 1.3% of Trustco Resources was sold to Riskowitz Value Fund for USD 4.5 million, who has an option to acquire a further 3.7% for USD 12.9 million.
Trustco Resources includes both the Namibian as well as Sierra Leonean mining assets, as well as the Namibianbased diamond cutting and polishing factory.
After the quarterly board meetings, where discussions were held about audit fees, two independent directors resigned, and the group’s South African auditors, Moore Johannesburg, resigned as well.
The board furthermore approved the issue of 12.96 million shares to staff.
The board also decided to change the financial year end to 30 September, to align the release of the full year results with the working calendars of the group’s capital and funder base in the northern hemisphere.
APRIL 2020: NAMIBIA LOCKDOWN EXTENDED / ENGAGEMENT WITH INTERNATIONAL FUNDERS
To prevent COVID-19 from spreading, the Namibian lockdown is extended until May.
The group engaged with its international funders to mitigate the economic effects of COVID-19.
MAY 2020: LOCKDOWN PARTIALLY LIFTED
The Namibian lockdown is partially lifted, as the country moves into different levels of lockdown depending on the region.
JUNE 2020: TRUSTCO FINANCE USD 20 MILLION FACILITY APPROVAL / DEBT RESTRUCTURING DISCUSSIONS
Trustco Finance, the student lending business of the group, received approval for a facility agreement of USD 20 million from an international lender, allowing its students to access financing while enhancing online educational facilities.
Debt restructuring discussions were initiated with the group’s international funders.
JULY 2020: NEW AUDITORS APPOINTED / DELAY OF INTERIM RESULTS
Following the resignation of Moore Johannesburg, Nexia SAB&T is appointed as the group’s South African JSE accredited auditors.
Due to the lockdown and travel restrictions imposed by the state of emergency and disrupting the engagement of the auditors, Trustco announced that the interim results for 31 March will only be released by 30 September.
AUGUST 2020: TIMELINES OF CIRCULARS EXTENDED
With new auditors appointed, all circulars for ongoing transactions have their due dates extended to allow for their completion.
SEPTEMBER 2020: TRUSTCO RESOURCES OPTION EXTENDED / DEBT RESTRUCTURING CONCLUDED
The option for Riskowitz Value Fund to acquire an additional 3.7% of Trustco Resources was extended until 31 March 2021.
Trustco’s debt restructuring discussions are concluded with its US, Swiss and German based lenders, with interest payments, capital holidays and term extensions negotiated. Restructuring with the African lenders was also approved, with USD 15 million in new
funding earmarked for strategic investments, subject to the legal documentation process.
As can be seen, both the management team and the board of directors have been exceptionally engaged in strategic matters during the financial period – but our efforts would have been in vain without the support we’ve received from stakeholders.
All the goals set by the board for the period under review was certainly not met, but I’m satisfied that the board properly reprioritised the essentials and management executed as such during the worldwide pandemic.
I am confident that the group is ideally positioned to resume its growth trajectory as it adjusts to the new normal, under the expert guidance of the board and our executive team in lockstep.
As I’m writing today, I’ve already seen the genesis of what will become Trustco 2.0.
|DR QUINTON VAN ROOYEN
EXECUTIVE DIRECTOR, GROUP MANAGING DIRECTOR AND CEO