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Johannesburg - Media24, a subsidiary of the R101bn Naspers media group, has written off R330m in debt which was used to finance its empowerment deal, Welkom Yizani.
Unveiled as the largest of its sector in 2006, Yizani Welkom contained 15% of Media24 in shares issued at R10 against a market value of R50/share. The offering, open to formerly disadvantaged South Africans, was heavily over-subscribed.
The difference between the issue price and market value of the Media24 shares was to be recouped through dividend flow.
However, the Welkom Yizani scheme is currently worth less than half its value of two years ago. This is owing to the decline in Media24's share which is trading at 21 35c/share at present. Media24 is not listed but its shares are traded over-the-counter. An update of its value was publicly provided earlier this week.
As the economic environment worsened during the two years since Welkom Yizani was launched in 2006, Media24's revenue took strain, resulting in lower dividend payments to shareholders.
As a result, Media24 has decided to write-off debt and preference shares issued in the scheme totalling R330m.
"We'll be writing off R119m in accrued interest arrears and redeem R211m in preference shares issued to Welkom Yizani," said Media24 CEO, Francois Groepe, on Wednesday.
This was to ensure the empowerment shareholders stood to gain value at the scheme's maturation, which has also been extended by two years, Groepe said.
Groepe said the global economic recession had made it difficult to maintain higher dividend payments sufficient enough to cover the interest repayment Welkom Yizani's debt attracted.
"Lots of BEE schemes are also under water, but we have a responsibility to our shareholders and decided to be proactive about their investments," said Groepe.
In addition to the debt write-off, Welkom Yizani on Wednesday declared a dividend of R24.7m, of which R19.8m will be used to repay debt while the company's 107 000 shareholders will share the remaining R4.95m.
- Fin24.com
Fin24.com is part of FinMedia24, a Naspers subsidiary.
