Property Flash


RMB Holdings (RMBH), the company which is trying to sell all its property assets as it is unwound is entering a world of pain because of a dispute with property developer, Atterbury, worth hundreds of millions of rand.

The group has the raw end of a deal with Atterbury Holdings, the property developer founded by Louis van der Watt in the 1990s.

At a presentation on Wednesday 14 December, RMBH’s CEO, Brian Roberts said there essentially was a difference in opinion on the settlement terms for a loan worth R489m made to Atterbury Property. RMBH is consulting its lawyers and board but its management looks out of its depth. It may be best for its shareholders if First Rand and RMB founder, GT Ferreira steps in and sorts out the mess.

RMBH unbundled its First Rand stake in mid-2020. It has since been exiting its property assets and distributed R2bn to its shareholders in the six months to end-September.

But shareholders are unhappy that RMBH is trading at a huge discount to net asset value (NAV). A trading statement released this week showed that RMBH’s revised NAV for RMBH for the year to end March 2023 would range between 77.5c and 116.3c a share while the share is trading at 50c.

RMBH’s management needs to sort out its dispute with Atterbury, of which it owns a 27.5% stake, as soon as possible. Atterbury is by far RMBH’s biggest asset following the recent sale of its stake in Atterbury Europe.

There is a concern that Atterbury is pushing to convert the loan into equity rather than repaying in cash. This would preclude the payment of another special dividend and it would also make it difficult for RMBH to sell its remaining property interests. Currently the commercial property sector is very short of fresh capital and people are hesitant to borrow large sums of cash at high interest rates.

Roberts said that a facility agreement between Atterbury and RMBH gave the property company a right to issue a conversion notice around the loan. This was on the condition that Atterbury, in their reasonable opinion, did not have available cash resources to repay the loan.

He said RMBH had been engaging with its lawyers since March this year.

“We are of the opinion that it was never the intention that Atterbury could force RMBH to accept shares as a form of repayment of the loan, and that we would always have the right to decline the offer of shares as a form of repayment,” he said.

“We sit on the Atterbury board, and it is in their interest to convert the loan. It improves their balance sheet. It reduces debt and provides financing for developments rather than repaying the loan,” said Roberts.

Property Flash believes that Atterbury has a huge incentive to convert the loan into shares as on the call Roberts said that the conversion price would be at Atterbury’s embedded value which equates to a 10 to 12% premium to market value as it also includes a value of the management and development businesses. Effectively the potential conversion could be seen as a recapitalisation of Atterbury by RMH at a 10 to 12% premium to net asset value which would position Atterbury well to grow its business very cheaply.

If RMBH does have to convert the loan to equity, it would then hold about 44% of Atterbury, a company with property interests including 20% of Mall of Africa.

At the presentation, Opportune Investments’ head, Chris Logan asked why RMBH had taken so long to inform the market about the price-sensitive loan conversion developments. He said the matter had been leaked into the market before the release of RMBH’s interim results.

Roberts said RMBH received notification from Atterbury in late November.

RMBH responded positively to the suggestion that GT Ferreira, RMH’s charismatic founder return to RMH to assist RMH deal with its current problems. 

Roberts is a director of Atterbury as is RMBH’s financial manager and company secretary, Ellen Marais.

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