Vunani has done some juggling in the background to come up with a way of recapitalising its balance sheet in order to cover its BEE-related loan covenants.  These covenants were breached when market prices of listed investments dropped (while the debt remained the same) and left the group looking exceptionally exposed.

The essence of Vunani's plan is an underwritten rights offer at 10c per share that intends to raise R325 million while retaining the group's premium BEE status of over 50% black owned.  The rights offer will be underwritten by the Vunani Group, which holds 63.4% of the listed company, to the value of R313.6 million.  This cash is being put up by various parties (however Fin24.com names Standard Bank and Investec as two of the parties) to Vunani Group and--most probably--will involve personal gaurantees by the company's shareholders.

This background aside, though, when you look at the numbers in the deal the reality is as follows:

In other words, VUN shareholders will be paying 10c for something that on breakup is worth only 9.56c.  Looked at in this manner, the rights offer seems aggressive and is perhaps a bit over priced, but it needs to kept in mind that Vunani also has an operating financial services group that needs to be valued on an earnings basis (as opposed a NAV basis for its underlying assets).

All in all, a bit of a gamble for minority shareholders who have already seen VUN's share price drop from its listing price of 100c to its current levels of around 10c, but a logical (though necessary) move by the listed company's controlling shareholder.

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