Ster-Kinekor’s successful exit from business rescue has saved it from liquidation and ensured the continued employment of staff and the refinancing of existing capital structures.
This is according to law firm Webber Wentzel which assisted and advised Ernst & Young‘s Stefan Smyth on the voluntary business rescue, which South Africa’s biggest cinema group entered in January 2021.
On Tuesday, Webber Wentzel said some of the challenges along the way related to obtaining approval from the Competition Commission and the South African Reserve Bank for the rescue transaction, which resulted in inevitable delays. The business rescue was also delayed by negotiations with about 20 landlords involved.
“All of the above occurred while Ster-Kinekor continued trading, which it initially did during the ever-changing lockdown regulations and which, at one stage, resulted in a complete shutdown of the business. This was also exacerbated by insurance-related issues, adding further complexity to the matters already at hand,” the law firm said in a statement.
The main transaction, of R250 million, involved the refinancing and restructuring of Ster-Kinekor’s debt, as well as the purchase of 100% of its shares by UK asset managers Blantyre Capital Limited and South Africa-based Greenpoint Specialised Lending.
“[Webber Wentzel] assisted with the negotiation and preparation of the main transaction documents, attending to stakeholder management and negotiating leases in respect of Ster-Kinekor’s 57 cinema sites across Southern Africa,” the law firm said.
The business rescue was initially a pre-emptive move by the board of directors after an assessment was conducted to determine whether Ster-Kinekor was in financial distress and whether a voluntary business rescue was the best course of action in light of the financial pressure caused by the Covid-19 lockdowns imposed from March 2020.
Webber Wentzel said the decision to enter into business rescue was appropriately timed and allowed the cinema group to experience a period of relief while proceedings were underway, adding: “The timing of this decision also ensured that the business rescue proceedings commenced while Ster-Kinekor was still rescuable.”
The cinema group was founded in 1969 and has dominated the local market for years, ahead of Nu Metro Cinemas.
In a statement announcing the successful exit from business rescue, Ernst & Young’s Smyth said about 800 jobs had been retained.
