Grit cashes P200m from Letlole

Before Grit Services Limited increased its stake in Letlole La Rona, it had a shareholding of 6.25 percent. Botswana Development Corporation (BDC), the majority shareholder, struck a much-touted deal with Grit for the government’s investment arm to reduce its stake in Letlole, handing them to what is recognised to be a leading pan-African real estate company focused on investing and actively managing a diversified portfolio of assets. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,4,3" ihc_mb_template="1" ] Grit acquired 66 500 000 ordinary shares of Letlole held by BDC in a share swap deal that saw BDC acquire a 3 percent stake in Grit. In 2020, BDC’s shareholding in Letlole declined from 65.8 percent to 42.0 percent while Grit’s stake in Letlole increased from 6.25 percent to 30.0 percent. It was not a cash transaction but the shares issued to Grit were worth P146.3 million, based on Letlole’s then trading price of P2.20. But two years down the line, Grit exercised an impromptu exit from the company gradually disposing of shares in a market sale. On 4 January this year, a cautionary issued by Letlole showed that Grit sold 19,000,000 shares at P3.48, cumulatively valued at P66,120,000. The number of linked units sold represents 6.79 percent of total securities issued by Letlole. Unitholders were informed that on 30 December 2022, Vunani Fund Managers acquired 18,375,145 of the 19,000,000 linked units on behalf of their client, Botswana Public Officers Pension Fund (BPOPF). The 18,375,145 units represented 6.56 percent of the total securities issued by the company. As a result of the trade, at 6 January 2022 (the settlement date) Grit held a 18.31 percent shareholding in the company while BPOPF, through its various asset managers, held 26.20 percent in the company. On 7 March 2023, Grit then sold 6 421 000 linked units, representing 2.29 percent of the company’s total securities in issue, at a market value of P 22 537 710. The sale followed a further sale of 4.78 percent (representing 13 347 068 linked units) on 24 February 2023 to various shareholders, cashing in P46,848,208.68. In aggregate, Grit sold 13.9 percent shareholding in the company between December 2022 and March 2023, resulting in current shareholding of 11.25 percent in the company. The Business Weekly & Review first learnt about the imminent exit of Grit early last year. Infact, as at June 2022, Grit’s stake had reduced from 30 percent to 25.1 percent amidst fierce political influence. Grit shed 13, 720, 000 shares, which averaged P40 million in value. Although Grit was not a majority shareholder, as a leading pan-African real estate company, it was given latitude to steer the wheels of Letlole, a development which reportedly rubbed the country’s top office up the wrong way. Coincidentally, Grit and Letlole said in a joint statement that Grit’s exit from Letlole followed its asset recycling strategy that would see it “withdraw from investments where it does not hold control”. In addition, the statement said Grit is exiting “where it has significant exposure to currencies other than US dollar, Euro or hard currency-pegged revenue streams”. Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. Despite that, Grit’s real estate income has had its own fair share of financial problems in the past few years and the company was reportedly seeking to offload some of its non-performing assets. Reports indicate that the COVID-19 pandemic has had a significant influence on Grit. Despite some signs of retail recovery, the pandemic has hastened structural issues in the property sector, and Grit is now looking to minimise its retail exposure, mostly through asset sales, according to a report by Quoted Data that says over the last 20 months, the value of its portfolio, which is primarily in the retail industry, has plummeted. On a like-for-like basis, Grit's portfolio valuation had dropped 14.2 percent (or US$114.9 million) since December 31, 2019. Sources say Grit’s struggling retail assets were situated in Zambia and Kenya. The company owns a number of troubled malls in Zambia which were battered by the Kwacha’s seemingly never-ending depreciation, a law effectively rendering all leases to be six months in duration, political uncertainty and consumer spending almost entirely dependent on a single commodity being copper. The strategy is to carve these problem children out of Grit’s portfolio. By offloading these undesirable properties, experts argued, Grit may solve its financial problem; raising cash while getting rid of unwanted assets. Strapped for cash, Grit’s share price has been taking a knock on the London Stock Exchange as banks become leery of lending to them on the back of a valuation hit on their property. The group's loan-to-value (LTV) ratio increased from 43.9 percent to 53.1 percent, according to Quoted Data, which reports that it is currently on the verge of breaching the debt covenant with the lowest applied LTV of 55 percent. Last year, Grit announced a capital offering of up to US$215.6 million, which would be used to pay down debt and buy a development firm. South African news outlet MoneyWeb reported that the company withheld paying dividends for the second year in a row after seeing a 30 percent decline in earnings. To save money, Grit reportedly implemented a cost-cutting strategy that included a 10 percent pay cut for senior management and the board of directors. Meanwhile, Letlole says through its investment and board positions at Letlole, Grit has played a meaningful role in improving governance controls and the board composition of Letlole, strengthening operating processes and procedure, supporting Letlole’s ability to consistently pay dividends at a minimum of 80 percent of distributable cashflows and promoting Letlole’s Go-to-Africa strategy, with the group now having access to hard currency income from the African market. Letlole says it will continue as a strategic partner to Grit on its Orbit Africa light industrial manufacturing facility and warehouse investment in Kenya, as well as potential other investment opportunities that are financially lucrative. [/ihc-hide-content]

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Grit cashes P200m from Letlole

Experts say Grit may solve its financial problem by raising cash while getting rid of unwanted problem children in Zambia, Kenya and elsewhere. However, this debt-recycling and what it did to Letlole reportedly rubbed the Office of the President here up the wrong way

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Grit cashes P200m from Letlole

Experts say Grit may solve its financial problem by raising cash while getting rid of unwanted problem children in Zambia, Kenya and elsewhere. However, this debt-recycling and what it did to Letlole reportedly rubbed the Office of the President here up the wrong way

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