Founding shareholders of Choppies Enterprise Limited, Ramachandran Ottapathu and Farouk Ismail, have ‘loaned’ Choppies a whopping P100 million to help the company pay its debt to its financiers, a circular on Botswana Stock Exchange (BSE) announced.
As of 19 September 2019 loans of an aggregate of approximately P680million were outstanding to the Lenders, according to Choppies.
The company said in terms of a facility agreement concluded between the Company and Choppies Distribution Centre (CDC) and certain of the Lenders, the capital of majority of loans was repayable, over a 5-year period of time, commencing 1 July 2020, with interest payable on a monthly basis. However, because of various instances of default, the main instance of which was failure to timeously deliver and publish the audited consolidated financial statements in respect of the year ended 30 June 2018, the principal balances of or the borrowings, became payable in full, on demand.
Choppies said the Lenders agreed to hold off making demand for immediate payment and proceeding to recover the full amount of the aggregate of the capital of the borrowings provided that there be an immediate reduction in the capital outstanding of the loans and sales of non-performing businesses of the Group, particularly those in South Africa, be proceeded with, with an agreed time frame.
Choppies agreed to a reduction of the capital of loans in the sum of P150million payable as to the amount of P 100million by 10 October 2019 and P 50million by 30 November 2019, and required that the Founding Shareholders guarantee the payment by the Company of the total aggregate of P 150million, on the due dates.
Accordingly, in terms of the guarantees, Ram and Farouk effected the payment of P100million. Ram himself effected a payment of P 80 million and Farouk effected a payment of P20million thereof to the agent for the Lenders, thereby causing the outstanding capital balance of the loans due to the Lenders to be reduced by the required P 100million.
The Botswana Stock Exchange Limited (BSEL) has confirmed that the contribution by the Founding Shareholders on behalf of the Company, in reduction of the capital outstanding to the Lenders may be considered a loan, by the Founding Shareholders, and a loan agreement in this regard entered into by the Company and the Founding Shareholders as related parties to the Company, provided that there be an independent professional expert opinion in respect of the fairness and reasonableness of the terms of the loan.
The Company appointed BDO Services (Pty) Limited, certified public accountants in Botswana, accredited as a financial advisor by the BSEL, with approval of the BSEL as an independent expert to render that opinion. That opinion was issued on 17 March 2020. The Loan Agreement between the Founding Shareholders and the Company, which will comply with the terms of the Intercreditor and Debt Reduction Agreement as currently in force as between the Company, CDC and the Lenders, will be concluded and the appropriate announcement made within the next 10 days. 12.
The second installment in reduction of the outstanding capital of the loans (that of P 50million which was due and payable on the 30 November 2019) was paid, in two tranches (with the approval of the Lenders) of P 20million on 20 December 2019 and P 30million on 14 January 2020, from the resources of the Group generated over the 2019/2020 festive season. The Company and the Lenders are in advanced discussions to agree on a Debt Reduction Plan which is expected to be finalised by the 31 March 2020.