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Johannesburg - Blue Financial Services [JSE:BFS] is investigating the possibility of a rights issue to remedy its serious financial position.
This comes after last week's announcement that the group had suffered an expected R1.5bn loss in the financial year to end-February.
Although some analysts reckon the group is technically bankrupt, a source within the company has said plans are being forged to refinance the group. These would include a new funder putting money into the group by means of a rights issue.
At this stage it is not clear whether the current shareholders will take up their rights. The investment unit of the insurer AIG – now known as Pinebridge – and Absa are the controlling shareholders with stakes of 25% and 20% respectively.
The group needs new capital, so it will not materially alter Blue’s current financial position if AIG or Absa are simply replaced as shareholders. At the same time a rights issue could further weaken existing shareholders’ interests.
Steps currently being taken include balancing assets and liabilities and placing issues such as goodwill and deferred tax on the balance sheet. The group's income has fallen sharply with the curtailment of loans. At the same time it still has a large amount of debt arising from the Credit U acquisition.
A source inside the group declined to reveal who the possible funder could be, saying only that local players were involved and these did not include existing shareholders.
The new group could take a controlling interest in the group or simply a large stake.
It is understood that the interested parties do not include other local microlending groups such as African Bank.
African Bank currently has its hands full with the tight market and the integration of Ellerines, which is taking longer than initially expected.
Another option being considered for Blue is to curtail some of its activities.
These include the withdrawal of investments in certain African countries where exchange -conversion problems have been a significant headache.
- Sake24.com
For business news in Afrikaans, go to www.sake24.com.
This comes after last week's announcement that the group had suffered an expected R1.5bn loss in the financial year to end-February.
Although some analysts reckon the group is technically bankrupt, a source within the company has said plans are being forged to refinance the group. These would include a new funder putting money into the group by means of a rights issue.
At this stage it is not clear whether the current shareholders will take up their rights. The investment unit of the insurer AIG – now known as Pinebridge – and Absa are the controlling shareholders with stakes of 25% and 20% respectively.
The group needs new capital, so it will not materially alter Blue’s current financial position if AIG or Absa are simply replaced as shareholders. At the same time a rights issue could further weaken existing shareholders’ interests.
Steps currently being taken include balancing assets and liabilities and placing issues such as goodwill and deferred tax on the balance sheet. The group's income has fallen sharply with the curtailment of loans. At the same time it still has a large amount of debt arising from the Credit U acquisition.
A source inside the group declined to reveal who the possible funder could be, saying only that local players were involved and these did not include existing shareholders.
The new group could take a controlling interest in the group or simply a large stake.
It is understood that the interested parties do not include other local microlending groups such as African Bank.
African Bank currently has its hands full with the tight market and the integration of Ellerines, which is taking longer than initially expected.
Another option being considered for Blue is to curtail some of its activities.
These include the withdrawal of investments in certain African countries where exchange -conversion problems have been a significant headache.
- Sake24.com
For business news in Afrikaans, go to www.sake24.com.
