Rights issue vital, Pinnacle Point warns

Posted On Monday, 04 January 2010 02:00 Published by
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Pinnacle Point has warned that its survival depends on its recapitalisation plan and the resolution of a dispute with Absa.

By Artwell Dlamini

Property developer Pinnacle Point has warned that its survival depends on its recapitalisation plan and the resolution of a dispute with Absa, one of the underwriters of its rights issue.

Releasing its interim results to August, the AltX-listed group said on Thursday that it had gone through a period of “stagnation” not only due to the poor state of the property sector, but also due to the financial restructuring plan it had undertaken.

The latest results underscore the difficulty Pinnacle faces in recapitalising itself.

For the period under review, net cash outflow from operations was R163m.

This, Pinnacle said, was mainly funded through a R98m bridging funding facility granted by Absa, a 5m shareholder s’ loan and cash surpluses.

Pinnacle said its ability to continue as a going concern depended on the successful conclusion of the rights offer and the resolution of the dispute with Absa regarding the underwriting agreement.

For the period, the loss amounted to R64m due to non- recurring costs of listing and capital restructuring. Interest- bearing debt rose by R146m over the period under review.

Revenue fell sharply, to R9,2m from R80m, as selling almost came to a standstill while capital restructuring was taking place. Pinnacle said this was made worse by “poor market conditions”.

Absa has refused to back the rights offer, which it and Goldbanc Management Associates had partially committed to underwrite and which was spurned by investors, until alleged breaches of the agreement were addressed.

Pinnacle said early last month that 66,61% of the 2,4-billion rights offer shares had been spurned by investors. It said these new shares would be allocated to Absa and Goldbanc.

But Absa alleges that Pinnacle is in breach of the underwriting agreement, demanding the certificate of occupancy for the Lagos Keys project and all environmental impact assessment approvals by the Lagos state government and the Nigerian federal government prepared for this project.

Pinnacle said its board maintained there “is no breach”, as alleged by Absa.

It seeks to raise R360m through the rights issue in order to, among others, reduce debts.

The group carried R545m in current liabilities and R424m in long- term liabilities. This excludes other debt obligations such as overdraft and deferred tax liabilities.

On Thursday, Pinnacle said it would be on a “sound financial footing” once the recapitalisation was completed.

It said confidence in the residential building sector had started to improve slowly.

“Investors in this sector are starting to return as the destocking cycle has normalised and there is plenty of value in the market at present.”

It expected positive results for the full year despite the inactivity seen in the first half of the year. Its shares closed at 7c on Thursday.

Source: Business Day


Publisher: I-Net Bridge
Source: I-Net Bridge

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