THABANG MOKOPANELE

Property Correspondent

LEISURE and lifestyle property group Pinnacle Point said yesterday discussions were under way with its stakeholders and lenders to restructure debt facilities and recapitalise the group.

As part of the process, the group has appointed advisers to advise on the various strategic options available that would allow for a normalisation of its liquidity and credit funding position.

“These negotiations are in process and clarity is being obtained on certain issues,” Pinnacle chief operating officer Stefan Braun said.

“However, until such stage as these issues have actually been addressed to the satisfaction of the funders, the ability of the company to continue as a going concern will remain in question, with the result that our results need to be qualified.

“We anticipate the removal of the qualification within a period of 30 days, provided all the issues are resolved,” he said.

Braun said the financial restructuring of the company was driven by a newly constituted executive team under the leadership of CEO Hennie Pretorius.

Reflecting the downturn in the lifestyle and leisure property market, Pinnacle Point posted a loss of R3m for the year ended February. It posted a R39m loss in the previous trading period.

The loss fell short of the earnings of R14,8m forecast at the time of the group’s listing on the Nigerian Stock Exchange in February.

Braun said the drop in earnings was also a result of the reduction of the profit achieved on the sale of one of the group’s properties, the Goldfields Plaza shopping centre in Welkom.

“Following the merger between Pinnacle Point Holdings and the Acc-Ross Holdings Group in October, all the assets of the group were revalued.”

This was “with the exception of the Goldfields Plaza shopping centre, as it had recently been valued and was not considered material to the transaction,” he said.

However, Braun said, in May the group’s auditors decided that, as the centre had been sold subsequent to the merger, a revaluation of the investment was required as at the end of October.

“By virtue of certain developments concerning the property subsequent to the merger, the auditors insisted on a much higher valuation of the property at 31 October, thereby significantly reducing the profit on the sale of this investment.”

Braun said that due to the global financial crisis, the funding for the subscription of 250-million shares by Lurco Trading 278 for a consideration of R200m did not materialise as envisaged in the circular to Acc-Ross shareholders.

“This, combined with challenging economic conditions, necessitated the restructuring of the group’s debt facilities in order to continue its operations without undue liquidity constraints,” Braun said.

He warned that the continuing global economic uncertainty would continue to affect the local property market and the performance of the group, particularly in the first half of the 2010 financial year.

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Source: Business Day