JSE boot will ‘devastate’ Trustco
If legal steps taken by Trustco Group Holdings don’t succeed, the JSE will suspend the listing of its shares on 11 March 2022.
Jo-Maré Duddy – Should the JSE suspend the listing of Trustco Group Holdings’ shares on the South African stock exchange, the Namibian-based company will suffer “incalculable” damage which will “likely devastate Trusto entirely and irreparably”.
This statement by Riaan Bruyns, internal legal advisor of Trustco, is contained in an affidavit as part of an application the group on Friday filed and lodged with the Financial Services Tribunal (FST) in South Africa for reconsideration of the JSE’s suspension decision.
The JSE on 14 February 2022 gave Trustco until 15:00 Friday to initiate and deliver legal proceedings against its decision.
Following Trustco’s application, the JSE suspended the implementation of its decision until 15:00 on 11 March 2022. If the group fails to obtain the appropriate relief by then, the JSE will immediately implement its suspension decision without further notice to Trustco.
In an update filed on the JSE and Namibian Stock Exchange (NSX) on Monday, Trustco said it simultaneously Friday filed an application seeking that the JSE’s suspension decision is itself suspended.
DRAWN-OUT CLASH
The latest developments stem from an ongoing feud between the JSE and Trustco regarding the latter’s financial statements for the year ending 31 March 2019, as well as its interim results for the six months ending 30 September 2019.
The issues revolves around the waiver of two loans by Trustco’s majority shareholder, Quinton van Rooyen – one of N$545.6 million and the other N$1 billion – as well as certain of Trustco’s Elisenheim properties. The JSE found that the group’s 2019 annual financial statements and its first half-year results in September 2019 did not, in material respects, comply with the International Financial Reporting Standards (IFRS).
On 22 November 2021, the FST dismissed an application by Trustco to reconsider a directive by the JSE to correct and restate its financial statements. In January this year, Trustco served an application to the High Court in South Africa to review the decision. This process is ongoing, Trustco said on Monday.
Trustco in December said it intends to delist from three stock exchanges and will seek a “business-friendly international exchange” after receiving the go-ahead from a non-binding vote of its minority shareholders.
Trustco intends to delist from the Johannesburg Stock Exchange (JSE), the NSX and the OTCQX in the US. The latter is the top tier of the three marketplaces for the over-the-counter (OTC) trading of stocks in the US.
PUBLIC INTEREST
Although the FST's ruling is currently subject of a review application, it remains valid, binding and enforceable until it is set aside or suspended by a court, the JSE said last Monday.
“In the circumstances, Trustco remains in breach of the JSE's decision, the listing requirements and the tribunal's ruling,” the stock exchange said.
The JSE’s general manager: issuer regulation, Annalie de Bruyn, on 13 December 2021 wrote to Trustco, commenting on the group’s contention that it requires more time to consider the effect of the FST decision and how to implement it.
“The JSE decision was taken over a year ago and Trustco accordingly had a year to consider and take advice on it, in the knowledge that its challenges to the JSE decision may prove to be unsuccessful,” De Bruyn said.
She continued: “The JSE is of the view that the proposed suspension is necessary to satisfy the objectives of the FMA [Financial Markets Act] and it is manifestly in the public interest.
“What Trustco is required to do involves restating its financial statements in an amount in excess of N$2 billion. The JSE considers that this is important information which the public must be told.”
‘DEVASTATING’
In his affidavit, Bruyns argued that that it would be “wholly inappropriate and significantly prejudicial to Trustco, its employees and its shareholders” if the JSE’s suspension decision was enforced before the reconsideration application had been considered and finally determined.
The JSE’s decision “imposes possible sanction” on Trustco and would have “devastating consequences” for the group and its stakeholders, he said.
Among others, it would “disable” Trustco’s staff from trading in the shares they receive as part of their compensation package and saving initiatives, Bruyns said.
It would cause “significant reputational damage to Trustco, particularly in an environment where the market is currently extremely sensitive when it comes to the transparency with which listed entities conduct business”.
The JSE’s decision would furthermore negatively impact Trustco’s international stakeholders and funders, as well as the group’s ability to raise capital for its current and future business operations.
“An involuntary suspension of Trustco’s shares will automatically create an event of default in accordance with the terms of certain of its investors,” Bruyns said.
According to him: “The prejudice and irreparable damage that Trustco will suffer is self-evident and catastrophic. Once that damage has been done, the egg cannot be unscrambled.”
NOTHING’S 'NAWA'
Trustco suffered a loss of N$988 million for the 11 months ended 31 August 2021, 188% more than the loss of N$343 million it reported for the 18 months ended 30 September 2020.
Its current liabilities at the end of August 2021 exceeded its current assets by N$664 million, the group’s latest set of financials shows.
Trustco’s auditors said it “indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern”.
The group’s ability to continue as a going concern is dependent on the successful implementation or conclusion various matters to address the liquidity risk the group faces on an ongoing basis, Trustco’s latest Integrated Annual Report states.
Global Credit Rating (GCR) in December placed Trustco’s long and short-term national scale ratings of CCC- and C respectively on a rating watch evolving.
The CCC- national scale long-term issuer rating means Trustco has “vulnerable financial security characteristics, with an elevated possibility of non-payment of policyholder obligations when due”.
The definition for a C national scale short-term issuer rating states that “without a currently unforeseen circumstance, policyholders are expected not to be paid”.
On Monday, Trustco closed at N$1.37 per share on the Overall Index of the NSX – the peak of N$16.00 per share it reached in its 2019 financial year a distant memory.
This statement by Riaan Bruyns, internal legal advisor of Trustco, is contained in an affidavit as part of an application the group on Friday filed and lodged with the Financial Services Tribunal (FST) in South Africa for reconsideration of the JSE’s suspension decision.
The JSE on 14 February 2022 gave Trustco until 15:00 Friday to initiate and deliver legal proceedings against its decision.
Following Trustco’s application, the JSE suspended the implementation of its decision until 15:00 on 11 March 2022. If the group fails to obtain the appropriate relief by then, the JSE will immediately implement its suspension decision without further notice to Trustco.
In an update filed on the JSE and Namibian Stock Exchange (NSX) on Monday, Trustco said it simultaneously Friday filed an application seeking that the JSE’s suspension decision is itself suspended.
DRAWN-OUT CLASH
The latest developments stem from an ongoing feud between the JSE and Trustco regarding the latter’s financial statements for the year ending 31 March 2019, as well as its interim results for the six months ending 30 September 2019.
The issues revolves around the waiver of two loans by Trustco’s majority shareholder, Quinton van Rooyen – one of N$545.6 million and the other N$1 billion – as well as certain of Trustco’s Elisenheim properties. The JSE found that the group’s 2019 annual financial statements and its first half-year results in September 2019 did not, in material respects, comply with the International Financial Reporting Standards (IFRS).
On 22 November 2021, the FST dismissed an application by Trustco to reconsider a directive by the JSE to correct and restate its financial statements. In January this year, Trustco served an application to the High Court in South Africa to review the decision. This process is ongoing, Trustco said on Monday.
Trustco in December said it intends to delist from three stock exchanges and will seek a “business-friendly international exchange” after receiving the go-ahead from a non-binding vote of its minority shareholders.
Trustco intends to delist from the Johannesburg Stock Exchange (JSE), the NSX and the OTCQX in the US. The latter is the top tier of the three marketplaces for the over-the-counter (OTC) trading of stocks in the US.
PUBLIC INTEREST
Although the FST's ruling is currently subject of a review application, it remains valid, binding and enforceable until it is set aside or suspended by a court, the JSE said last Monday.
“In the circumstances, Trustco remains in breach of the JSE's decision, the listing requirements and the tribunal's ruling,” the stock exchange said.
The JSE’s general manager: issuer regulation, Annalie de Bruyn, on 13 December 2021 wrote to Trustco, commenting on the group’s contention that it requires more time to consider the effect of the FST decision and how to implement it.
“The JSE decision was taken over a year ago and Trustco accordingly had a year to consider and take advice on it, in the knowledge that its challenges to the JSE decision may prove to be unsuccessful,” De Bruyn said.
She continued: “The JSE is of the view that the proposed suspension is necessary to satisfy the objectives of the FMA [Financial Markets Act] and it is manifestly in the public interest.
“What Trustco is required to do involves restating its financial statements in an amount in excess of N$2 billion. The JSE considers that this is important information which the public must be told.”
‘DEVASTATING’
In his affidavit, Bruyns argued that that it would be “wholly inappropriate and significantly prejudicial to Trustco, its employees and its shareholders” if the JSE’s suspension decision was enforced before the reconsideration application had been considered and finally determined.
The JSE’s decision “imposes possible sanction” on Trustco and would have “devastating consequences” for the group and its stakeholders, he said.
Among others, it would “disable” Trustco’s staff from trading in the shares they receive as part of their compensation package and saving initiatives, Bruyns said.
It would cause “significant reputational damage to Trustco, particularly in an environment where the market is currently extremely sensitive when it comes to the transparency with which listed entities conduct business”.
The JSE’s decision would furthermore negatively impact Trustco’s international stakeholders and funders, as well as the group’s ability to raise capital for its current and future business operations.
“An involuntary suspension of Trustco’s shares will automatically create an event of default in accordance with the terms of certain of its investors,” Bruyns said.
According to him: “The prejudice and irreparable damage that Trustco will suffer is self-evident and catastrophic. Once that damage has been done, the egg cannot be unscrambled.”
NOTHING’S 'NAWA'
Trustco suffered a loss of N$988 million for the 11 months ended 31 August 2021, 188% more than the loss of N$343 million it reported for the 18 months ended 30 September 2020.
Its current liabilities at the end of August 2021 exceeded its current assets by N$664 million, the group’s latest set of financials shows.
Trustco’s auditors said it “indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern”.
The group’s ability to continue as a going concern is dependent on the successful implementation or conclusion various matters to address the liquidity risk the group faces on an ongoing basis, Trustco’s latest Integrated Annual Report states.
Global Credit Rating (GCR) in December placed Trustco’s long and short-term national scale ratings of CCC- and C respectively on a rating watch evolving.
The CCC- national scale long-term issuer rating means Trustco has “vulnerable financial security characteristics, with an elevated possibility of non-payment of policyholder obligations when due”.
The definition for a C national scale short-term issuer rating states that “without a currently unforeseen circumstance, policyholders are expected not to be paid”.
On Monday, Trustco closed at N$1.37 per share on the Overall Index of the NSX – the peak of N$16.00 per share it reached in its 2019 financial year a distant memory.
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