Board Approves Redcape Recap

By Clyde Mooney

In an eleventh-hour offer by the power brokers involved, Redcape Property Fund (RPF) may finally see some light at the end of its financial tunnel with conditional approval announced for a rescue package.

A source told TheShout that the New York-based Goldman Sachs-led consortium that snapped up 39 percent of RPF’s senior debt in May has been ‘trying to get a deal over the line to keep the property group operational’.

The stumbling block has been the audacious Junior debt holders, the ANZ and Bank of Scotland (BOSI), holding out for better than the 30c in the dollar offered for their $60 million.

5pm today (July 29) marks the expiry the latest exclusivity period for Goldman Sachs, and the RPF board has announced the receipt and their approval of a rescue package proposed by the investment group.

The deal would see senior debt refinanced with a new banking syndicate, and a ‘payment’ made to the Junior lenders, believed to be a reassertion of the previous offer.

An equity investment of $278 has been put forward, which would allow the doors of RPF’s 80 properties to stay open and staff employed.

The arrangement stipulates 100 per cent of RPF’s listed shares being acquired for $0.08 each, representing a 16 per cent discount on yesterday’s closing price.

Despite this, the Board has announced that it believes the offer to be in the best interest of the stakeholders, effectively disclosing its view for the future otherwise.

However, the acceptance is annexed with the disclaimer that it comes ‘in the absence of a superior proposal’, hinting all hope has not been lost although no other offer is likely.

Regardless, the proposal is still subject to acceptance by both the Junior debt holders and the stakeholders, with the banks appearing unlikely to back down on their right to a pound of flesh.

By definition ‘Junior’ debt ranks after other debts should a company fall into receivership, and may not be honoured if funds are insufficient.

Independent of the rescue, the RPF Board will meet in August to determine whether remaining debt can at that time continue to be serviced, or if liquidation is the best path forward.

This is an outcome the Junior lenders must consider, as it is widely believed that a liquidation of RPF’s assets, despite being worth more than its debt on paper, will not fetch true market value and fail to generate enough revenue to also repay the Junior debt.