Amended Revised Business Rescue Plan Pezula Resort Hotel & Spa Proprietary Limited

Transcription

1 Amended Revised Pezula Resort Hotel & Spa Proprietary Limited Registration Number 2003/003659/07 Business Rescue Practitioners: Zaheer Cassim & Paul Vorster Address: Practitioners Contact Number: Publication Date: 6 June 2018

2 Table of Contents 1. Executive Summary Introduction Definitions Part A Background Business Rescue Procedure Brief Introduction to the Company Events and Circumstances Leading to Financial Distress Business Rescue Interventions and Activities A complete list of all the material assets of the Company A complete list of the Creditors and Employees of the Company The probable liquidation dividend that would be received by Creditors Further Consequences of Liquidation A complete list of the holders of the Company s issued securities The BRPs remuneration A statement whether the BR Plan includes a proposal made informally by a Creditor Part B Proposals The nature and duration of any moratorium for which the BR Plan makes provision The extent to which the Company is to be released from and/or the repayment of their debts are restructured Payment Proposal to Creditors Proposal to the Post Commencement Financier Proposal to Trade Creditors Excess Cash Provision Proposal to Suite Owners Body Corporate Pezula Resort Hotel & Spa (Pty) Ltd Page 2 of 44

3 5.3.6 Proposal to Hilton Proposal to Shareholder The property of the Company that is to be available to pay Creditors claims The order of preference in which the proceeds of the sale of property will be applied to pay Creditors The benefits of adopting the BR Plan as opposed to benefits that creditors would receive if the Company were to be placed in liquidation The ongoing role of the Company The Treatment of Existing Agreements The effect that the BR Plan will have on the holders of each class of issued securities Part C Assumptions and Conditions Conditions that must be satisfied for the business rescue plan to come into operation Conditions that must be satisfied for the business rescue plan to be fully implemented which shall cause the plan to come to an end The effect that this plan contemplates on the number of employees, and the terms and conditions of employment The projected Income Statement and Balance Sheet as well as Projected Cash Flow Assumptions General Risks Administrative Provisions Regarding Claims Proof of claims Disputed claims Contingent claims Late claims Dispute Resolution General Provisions Procedure to amend the BR Plan in the future should it become impossible to implement Pezula Resort Hotel & Spa (Pty) Ltd Page 3 of 44

4 8.2 Procedure to amend the BR Plan in the future if the BRP is of the view that an amendment is necessary or beneficial General Certificate Cassim Certificate Vorster Annexure A List of Assets Annexure B List of Creditors Annexure C List of Employees Annexure D Projected Income Statement Annexure E Projected Balance Sheet Annexure F Projected Cash Flow Annexure G1 Revised Uniform Rental Agreement Annexure G2 Revised Annexure A to Uniform Rental Agreement Annexure H Material Terms of the VNL Money Vouchers Annexure I1 Draft Deed of Sale (Not VAT Registered) Annexure I2 Draft Deed of Sale (VAT Registered) Pezula Resort Hotel & Spa (Pty) Ltd Page 4 of 44

5 1. Executive Summary 1.1 The adoption of this BR Plan is only conditional upon: the adoption by Creditors and the Shareholder at a meeting convened and held in terms of Section 152 of the Act. 1.2 This BR Plan proposes: all known Creditors with Claims in the ordinary course of business (excluding Hilton in respect of its pre- Commencement Claims, Suite Owners, CII Hotel and Resorts, the Shareholder and related parties) shall continue to be paid in full in the ordinary course of business according to the respective agreements validly and lawfully concluded prior to the Commencement Date with these Creditors; the shares of the Company shall be transferred to K or its Nominee; the transfer of all Claims of the Shareholder, CII Hotel and Resorts and related parties to K or its Nominee and subordination of such Claims; the cancellation of the Hilton Management Agreement and the appointment of VNL to manage the Hotel Operations; the following to Suite Owners: payment of R to Werksmans Attorneys for legal fees incurred by Suite Owners; in addition to above, Suite Owners shall be entitled to exercise an election between Proposal 1 or Proposal 2 as set out below: Proposal 1: The Conclusion of a new Uniform Rental Agreement with all Suite Owners; Pezula Resort Hotel & Spa (Pty) Ltd Page 5 of 44

6 Payment of R per Unit in respect of Post Commencement Claims; and Issuing of VNL Money Vouchers of R per Suite Owner in respect of Pre- Commencement Claims Proposal 2: Suite Owners shall be entitled to sell their Units to VNL at a purchase consideration of R inclusive of VAT (if applicable) per Unit, inclusive of all and any Pre- and Post Commencement Claims in terms of a written deed of sale (see Annexures I1 and I2) to be concluded between the parties Should any particular Suite Owner fail to make an election between Proposal 1 or 2 above within 14 days from the Adoption Date, they shall be deemed to have elected Proposal 1. The BR Plan will accordingly be adopted in respect of that Suite Owner incorporating Proposal The following to Hilton: The subordination and transfer of Hilton s Pre-Commencement Claims to the Shareholder; and The payment of Hilton s Post Commencement Claims in full. 1.3 This BR Plan shall have no effect on the rights of Employees. Pezula Resort Hotel & Spa (Pty) Ltd Page 6 of 44

7 2. Introduction 2.1 This is a prepared for Affected Persons in terms of Chapter 6 of the Act. This Business Rescue Plan will be presented to all Affected Persons by the BRPs for Affected Persons to consider the proposals contained herein and vote on the proposals as set out in this document and its annexures. 2.2 Upon receipt of this you are advised to consult your attorney and/or your accountant, who will advise you on what action to take in terms of this document. 2.3 The information set out in this BR Plan has been compiled by the BRPs with reliance on the information provided to them by the management of the Company. 2.4 Whilst every effort has been made by the BRPs to ensure the accuracy of the information contained herein, the BRPs can give no warranty in this regard save to confirm, to the best of their knowledge and belief, that: such information is reasonably accurate, complete and up to date; and any projections provided are reasonable estimates made in good faith on the basis of factual information and reasonable assumptions as set out in this BR Plan. 2.5 This document is provided solely for the information of Affected Persons to the Proceedings and does not constitute legal advice. 2.6 In order to comply with the Act, this BR Plan must contain all the information reasonably required to facilitate Affected Persons in deciding whether or not to accept or reject it, and must be divided into three Parts, Part A Background, Part B Proposals and Part C Assumptions and Conditions. 2.7 Neither the BRPs nor their respective employers, or any subsequent employer, or any of its subsidiaries or affiliates, shall be held liable on any basis for any decisions of whatsoever nature as a result of the use of the information contained in this BR Plan. Pezula Resort Hotel & Spa (Pty) Ltd Page 7 of 44

8 2.8 Business rescue 1 is aimed at facilitating the rehabilitation of companies that are financially distressed by providing for: the temporary supervision of the Company, and the management of its affairs, business and property; a temporary moratorium on the rights of claimants against the Company or in respect of property in its possession; and the development and implementation, if approved, of a plan to rescue the Company by restructuring its affairs, business, property, debt and other liabilities, and equity in a manner: that maximises the likelihood of the Company continuing in existence on a solvent basis; or alternatively, and in the event that it is not possible for the Company to so continue in existence on a solvent basis, that would result in a better return for its Creditors or Shareholders than would result from the immediate liquidation of the Company. 2.9 The BRPs have investigated the Company s affairs, business, property and financial situation and have concluded that this BR Plan provides for a successful financial turnaround for the Company, and accordingly, there is a reasonable prospect to implement it for the Company to continue in existence on a solvent basis and thereby preserve the business of the Company and employment of all its Employees. 1 Section 128(1)(b) Pezula Resort Hotel & Spa (Pty) Ltd Page 8 of 44

9 3. Definitions 3.1 the Act means the Companies Act 71 of 2008 as amended; 3.2 the Adoption Date means the date of adoption of this BR Plan at the Meeting; 3.3 Affected Persons means affected persons as defined in Section 128 (1) of the Act and in relation to the Company means shareholders, creditors and employees of the Company; 3.4 Auction Value means an estimate of the realisable value of the Company s assets on a public auction where a sale is concluded on a forced sale, upon the fall of the hammer, to the highest cash bidder during an auction which was reasonably well advertised and attended by members of the public; 3.5 Assets means all assets of the Company as reflected in the books of account of the Company as at the Commencement Date; 3.6 Buffshelfco means Buffshelfco 9 (Pty) Ltd, a private company with registration number 2014/156527/07; 3.7 Business Rescue Practitioners or BRPs means Cassim and Vorster duly jointly appointed by the Company as BRPs and certified in terms of Section 138 of the Act by CIPC as Senior BRPs as defined in Regulation 126 to the Act; 3.8 or BR Plan or this plan means this document which is a business rescue plan prepared in terms of Section 150 of the Act published by the BRP effective from the Commencement Date; 3.9 Cassim means Zaheer Cassim, an attorney, insolvency practitioner and senior business rescue practitioner, practising from 461 Fehrsen Street, Brooklyn, Pretoria; 3.10 the Castle means the rooms and other amenities located at Portion 91 of Farm Number 394, Knysna, Noetzie; 3.11 CII Holdings means CII Holdings (Pty) Ltd, a private company with registration number 2002/004266/07; 3.12 CII Hotel and Resort means CII Hotel and Resort Cape Town (Pty) Ltd with registration number 2005/019649/07; 3.13 CIPC means the Companies and Intellectual Property Commission; 3.14 Claims subject to the proviso below means all claims against the Company, the cause of action in respect of which arose, prior to, on or after the Commencement date, of whatsoever nature and from whatsoever cause, including claims, arising from contract, delict, actual, contingent, prospective, conditional, unconditional, liquidated, unliquidated, assessed, unassessed, whether or not due for payment of performance, specific or otherwise, and including all claims arising out of any agreements entered into by the Company on or prior to the commencement date, all such claims to be, calculated and admitted, as envisaged in the Insolvency Act, that would attach to them upon the issue of a winding up order in respect of the Company, whether or not such claims are proved or not, which claims shall, for the purpose of this, be treated as Pezula Resort Hotel & Spa (Pty) Ltd Page 9 of 44

10 if the Company had been liquidated on the Commencement Date; provided however that in applying the provisions of the Insolvency Act any preferences or rights of preferences as created in that act attributing to any Creditor is expressly excluded such that no Creditor can claim against the Company any preferences in respect of their claim insofar as such preference(s) are dealt with, established or created in the Insolvency Act; 3.15 Commencement Date means the date upon which the court ordered that the Company commence business rescue proceedings being 17 November 2016; 3.16 the Company or Pezula means Pezula Resort Hotel & Spa (Pty) Ltd, a private company duly incorporated with registration number 2003/003659/07; 3.17 Concurrent Creditors means creditors having concurrent or unsecured Claims as envisaged in terms of the Insolvency Act; 3.18 CPOR means cost per occupied room; 3.19 Creditors means all legal entities, including natural persons, having secured, preferent and/or concurrent Claims against the Company as at the Commencement Date as envisaged in the Insolvency Act; 3.20 Employees means all employees of the Company that are in its employ at the date of publication of this BR Plan; 3.21 "Excess Cash" means the amount by which the net cash movement, excluding extraordinary income, expenses and capital items, in the sole discretion of the BRP, for a particular Month exceeds the amount of working capital and cash needed to operate the Company on a day to day basis. Please see Annexure F for the working capital and cash required to operate the Company on a day to day basis; 3.22 Final Date means the date upon which all conditions to this BR Plan having been fulfilled and the final payment in terms of this BR Plan having been made to Creditors; 3.23 Hilton means Hilton International Manage LLC, Hilton International Management Corporation and any holding companies or subsidiaries thereof in as far as they are Affected Persons; 3.24 Hilton Management Agreement means the agreement entered into between the Company and Hilton on or about 20 June 2012 regulating the relationship between Hilton and the Company in respect of the management of the Hotel; 3.25 Hotel means the hotel, spa and resort operations under the Hilton Conrad brand where the Suites are the hotel rooms and Section 79 is the main hotel building; 3.26 Initial Assessment means the initial assessment conducted by the BRP in the first days of the Proceedings; 3.27 Insolvency act means the Insolvency Act 24 of 1936; 3.28 "JWMC means JWMC Holdings (Pty) Ltd, a private company with registration number 2013/035340/07; Pezula Resort Hotel & Spa (Pty) Ltd Page 10 of 44

11 3.29 K means K (South Africa) (Pty) Ltd a newly incorporated company part of the Village and Life Group of Companies; 3.30 Liability means historical claims listed in the financial Annexures as well as Post Commencement Finance; 3.31 LRA means the Labour Relations Act, 66 of 1995; 3.32 the Meeting means the meeting convened in terms of section 151 (1) of the Act in order to consider the proposed BR Plan; 3.33 Month 1 means the first month of the projected financial model being July Months of the financial model follow in consecutive number thereafter, the financial model culminating in Month 36; 3.34 Pre-Commencement Claims means the Claims of Creditors that arose prior to the Commencement Date; 3.35 Post Commencement Claims means the Claims of Creditors that arose after the Commencement Date or the Claims of Creditors who have provided Post Commencement Finance to the Company; 3.36 Post Commencement Finance means Post Commencement Finance as envisaged in Section 135 of the Act; 3.37 Post Commencement Financier means any part who advances Post Commencement Finance to the Company; 3.38 Preferent Creditors means Creditors having preferent claims as envisaged in terms of the Insolvency Act; 3.39 Proceedings means these business rescue proceedings as provided for in Chapter 6 of the Act; 3.40 Room Revenue Agreement means all room revenue agreements entered into between the Company and Suite Owners before the Commencement Date, including any amendments or addendums thereto; 3.41 SARS means the South African Revenue Services; 3.42 Section means one of the 79 Sections of the Sectional Title Scheme; 3.43 Section 79 means Section 79 of the Sectional Title Scheme, the main Hotel building; 3.44 Sectional Title Scheme means the Pezula Hotel Resort and Spa developed on Erf Knysna, Lagoon View Drive, Sparrebosch, Knysna, originally registered in the Cape Town Registrar of Deeds on 22 December 2004 consisting of 79 Sections; 3.45 Secured Creditors means Creditors having secured claims as envisaged in terms of the Insolvency Act; 3.46 Shareholder means the shareholder of the Company, CII Holdings; 3.47 Steering Committee means the committee of five members elected by the Suite Owners, excluding Buffshelfco, for purposes of engagement with the BRPs; 3.48 Substantial Implementation Date means the date on which the BRP files a Notice of substantial implementation at CIPC in terms of Section 152 (8) of the Act; Pezula Resort Hotel & Spa (Pty) Ltd Page 11 of 44

12 3.49 Suite means one of the 78 hotel rooms, each one being a Section in the Sectional Title Scheme and excludes the Hotel, Section 79. For purposes of calculating the pro rata room revenue, there are 80 Units, as two Suites, being the two presidential Suites, are counted as two Units each; 3.50 Suite Owner means the registered owner of a Suite; 3.51 Uniform Rental Agreement means the proposed Uniform Rental Agreement to be entered into between the Suite Owners and the Company incorporating the terms set out in this BR Plan, a copy of which is attached an marked Annexures G1 and G2; 3.52 Unit means, for purposes of calculating the pro rata room revenue, there are 80 Units, as two Suites, being the two presidential Suites, are counted as two Units each; 3.53 VNL means Village n Life, a group which owns, operates and manages tourism properties in South Africa; 3.54 VNL Money Vouchers may be redeemed for accommodation (subject to availability), Food and Beverage and/or Spa Treatments. VNL Money vouchers may be redeemed at Pezula Resort Hotel and Spa, The Bay Hotel Camps Bay, Camps Bay Retreat, Harbour House Hotel in Hermanus, The Farmhouse Hotel in Langebaan. The vouchers will be valid for one year from date of issue; 3.55 Vorster means Jan Paul Vorster, an engineer and senior business rescue practitioner, practicing from 28 Nederberg Road, Lanseria, Johannesburg; 3.56 Working Committee means the Committee established by resolution at the Section 151 meeting dated 7 th of August 2017, comprising of Warren Kilborn and Eckhard Marshing on behalf of Suite Owners and Hamza Farooqui on behalf of the Shareholder. Pezula Resort Hotel & Spa (Pty) Ltd Page 12 of 44

13 4. Part A Background Business Rescue Procedure These Proceedings commenced in terms of Section 131 of the Act by way of a court order granted on 17 November Cassim and Vorster were appointed by way of the court order granted on 17 November 2016 as joint BRPs The first meeting of Creditors, in terms of Section 147 of the Act, was held on 1 December 2016, where the Creditors, inter alia, ratified the appointment of the BRPs The first meeting of Employees, in terms of Section 148 of the Act, was held on 7 December Pursuant to the provisions of Section 150 (1) of the Act and after consultation with the major Creditors, other Affected Persons and the management of the Company, this BR Plan was prepared for submission to Affected Persons for their consideration and possible adoption at the Meeting This BR Plan will be published in compliance with the provisions of section 150 of the Act and within the time constraints provided for in terms of Section 150(5) of the Act as extended by the holders of the majority of the Creditors voting interests as provided for in terms of section 150(5) (b) of the Act to 31 July The BRPs published an initial BR Plan on 30 July The initial BR Plan was considered at a meeting convened in terms of section 151 of the Act. After the consideration of the initial BR Plan at the Section 151 meeting it was resolved that the meeting would be adjourned to enable a Working Committee comprising of Suite Owner and Shareholder representatives to work together to reach consensus towards the publication of a revised BR Plan. Following two meetings of the Working Committee the parties reverted to proposals and counter proposals via their legal representatives to negotiate final differences The Section 151 meeting was adjourned on several occasions, with the last adjournment being to Tuesday, 24 October A Revised BR Plan was adopted on 24 October Pursuant thereto: The Shareholder and Suite Owners could not agree on the terms and conditions of the agreement for the sale of the Units; and 2 Section 150 (2) (a) Pezula Resort Hotel & Spa (Pty) Ltd Page 13 of 44

14 The Shareholder concluded an agreement with VNL for the sale of the shares of the Company to K , which sale is conditional upon inter alia the adoption of an amended revised BR Plan An amended revised BR Plan was published on 14 May 2018 and at the meeting convened for consideration thereof, the BRPs were directed to adjourn the meeting to 12 June 2018 and publish a further revised plan The proposals contained in this revised BR Plan are a culmination of the deliberations that took place with the relevant Affected Persons. 4.2 Brief Introduction to the Company The Sectional Title Scheme was developed on Erf Knysna, Lagoon View Drive, Sparrebosch, Knysna, originally registered in the Cape Town Deeds Office on 22 December The intention was to establish the Pezula Resort Hotel and Spa as a luxury, all-suite boutique hotel to five-star international standards set against the backdrop of a championship golf course overlooking the Knysna Lagoon and the Indian Ocean, as reflected in its prospectus The Sectional Title Scheme comprises of 79 Sections. The Hotel rooms consist of 78 Suites (each one being a Section of the Sectional Title Scheme) which by virtue of various agreements, including the Room Revenue Agreements, form part of the operations of the Hotel. However, for purposes of calculating the pro rata room revenue, there are 80 Suites or Units as two Suites, being the two presidential Suites, are counted as two Units each. Section 79 consists of the main Hotel building which is separately owned by Buffshelfco and not subject to the Room Revenue Agreement As of November 2012, in terms of a management and licensing agreement, the Hotel has been managed by Hilton, operating as Conrad Pezula The intention of the Sectional Title Scheme was for the Hotel and the Suite Owners to participate in the entire resort Suites (12 Units) are owned by Buffshelfco. Historically, these Units were treated separately from Category B (below) in as far as no room revenue was raised or recognised for these 12 Units. However, these 12 Units should be bound by the same Room Revenue Agreement applicable to other Units for the sake of uniformity amongst the Suite Owners At present there are three disparate categories of Room Revenue Agreements, summarised as follows: Category A: 12 Suites (12 Units) are covered by the original Room Revenue Agreement which provides for revenue sharing under the following terms: Pezula Resort Hotel & Spa (Pty) Ltd Page 14 of 44

15 Suite Owners are entitled to receive 25% of the gross room revenue ( GRR ). Category A Suite Owners are not guaranteed any additional payments. Suite Owners are allowed 30 room nights per year for owner use consideration. Suite Owner revenue is reduced by owner use consideration, which is calculated as follows: GRR X.25 X 335 / 365 / 80 = owner use consideration. At the end of the year, owner usage is verified and Suite Owners are paid for unused room nights based on the following formula: GRR X.25 X unused room nights/365/80 = Agterskot Agterskot = True-up of payments outstanding paid at end of year The fiscal year for Category A Suite Owners is January December, and quarterly payments are paid (Apr, Jul, Oct, Jan). Annually, the Category A Suite Owners are entitled to 360 room nights of usage collectively, or 1.3% of hotel occupancy (based on 78 Suites) Category B: 53 Suites (55 Units as it includes the 2 presidential Suites) are covered by a modified Room Revenue Agreement which provides for revenue sharing under the following conditions: Suite Owners are entitled to receive 30% of the gross operating profit ( GOP ) as defined in the Room Revenue Agreement Suite Owners are allowed 30 room nights per year for owner use consideration. Suite Owners are entitled to a guaranteed payment of a minimum of R30 000, which is increased annually based on Annual CPI. The fiscal year for Category B Suite Owners is March February, and quarterly payments are paid (Jun, Sep, Dec, Mar). At the end of the fiscal year, a Suite Owner s share of GOP is calculated as follows: (30% GOP) / 80 Owner s Payments Paid = Category B Owners Annual Payment. Annually, the Category B Suite Owners are entitled to room nights of usage collectively, or 6.1% of Hotel occupancy (based on 78 Suites) Category C: 1 Suite (1 Unit) of the Category B Suite Owners has a further modified contract that does not require a guaranteed minimum payment In terms of the Room Revenue Agreements, all operating expenses were for the account of the Company, including insurance, rates, taxes, maintenance and repairs of the Hotel, Suites and common areas. Pezula Resort Hotel & Spa (Pty) Ltd Page 15 of 44

16 4.3 Events and Circumstances Leading to Financial Distress The dispute between the Company and the Suite Owners, as a result of the perceived lack of communication between the Company and Suite Owners as well as non-payment to the Suite Owners of room revenue entitlements, forced by financial considerations, ultimately resulted in a liquidation application being issued by Suite Owners The BRPs have identified the following principle problems in respect of the current structure: the lack of uniformity in the Room Revenue Agreements applicable to all Suite Owners, including Buffshelfco; the Suite Owners who collectively form part of the first amended Room Revenue Agreement are entitled to payments based on the gross profits of the operation which is financially non-viable for the profitable operation of the Hotel; the Hilton Conrad standard cost structure is such that the Company cannot and has not traded profitably since the conclusion of a management agreement with the Hilton group, as the operator of the Hotel, which resulted in the inability to pay Suite Owners; the occupancy rate was negatively affected by the high cost structure and inflexibility of the Conrad brand, which resulted in sustained losses that had to be funded by the Shareholder, and had a bearing on the ability of the Company to pay the Suite Owners; and the body corporate being dysfunctional in that the body corporate purports to function in the absence of Buffshelfco participation, the latter being the holder of a majority of the body corporate participation quota. 4.4 Business Rescue Interventions and Activities Trading: The Company has continued normal trading operations with financial constraints since the Commencement Date The BRPs have suspended the Company s obligations in terms of the furniture, fixtures and other equipment ( FF&E ) reserve requirement in terms of the Hilton Management Agreement The BRPs have been forced to suspend the Company s payment obligations in terms of the Room Revenue Agreements with the Suite Owners. Pezula Resort Hotel & Spa (Pty) Ltd Page 16 of 44

17 The trading results for the first 6 months of 2017 are set out in the table below: Occupancy 49% 48% (0%) Income Statement Forecast Actual Variance Revenue ( ) Residential Sales Food and Beverages Sales ( ) Other Revenue Revenue (Sales) Intervention YTD YTD Direct Operating & Departmental Expenditure ( ) ( ) ( ) Direct Costs Food and Beverages ( ) ( ) Operating Payroll ( ) ( ) ( ) Operating Expenses ( ) ( ) Other Cost of Sales Total Dept. Profit ( ) Expenditure ( ) ( ) ( ) General and Administration ( ) ( ) ( ) Sales & Marketing ( ) ( ) IT & Telecommunications ( ) ( ) HR ( ) (93 308) POMEC ( ) ( ) Rent - ( ) ( ) Annual Industry Specific Overheads - (26 256) (26 256) Gross Operating Profit (23 035) ( ) Management Fees Agreement - Hilton ( ) ( ) Gross Operating Profit after Management Fees ( ) ( ) Insurance + FF&E Expenses ( ) ( ) (78 781) Interest Earned Interest Charged Depreciation Net Profit ( ) ( ) Pezula Resort Hotel & Spa (Pty) Ltd Page 17 of 44

18 4.4.2 Suite Owners: The BRPs have been engaging with the trustees of the body corporate as well as Nolands Forensic (Section 21 body corporate experts appointed by the body corporate) to address issues relating to the body corporate and to ensure that it will: be compliant with the statutory requirements; adopt an appropriate budget; recover expenses from the Suite Owners; to include the major participants in the functioning of the body corporate; to resolve divergent views of Suite Owners regarding the functioning of the body corporate rules and the relationship with Suite Owners; and to the extent necessary, deal with the common property The BRPs were in constant negotiations, prior to the publication of the initial BR Plan, with Representatives of the Steering Committee, other Suite Owners and the Shareholder to find an alternative operational structure for the Hotel that would provide a financially viable solution for all Affected Persons for example, inter alia, by changing the brand and separating the operational costs between the Company and the body corporate The legal representatives of the Suite Owners addressed a letter to the BRPs on 8 June 2017, purporting to terminate the Room Revenue Agreements as a result of an alleged repudiation of the Room Revenue Agreements by the Company. The BRPs have rejected the alleged repudiation by the Suite Owners. As far as the BRPs are concerned, the Company s payment obligations under the Room Revenue Agreements are, and remain, lawfully suspended Post Commencement Finance: The Shareholder is committed to provide Post-Commencement Finance to cover the cost of operations of the Company from the adoption of the BR Plan until the Substantial Implementation Date Financial Controls: The BRPs, in conjunction with members from the Steering Committee and Nolands Forensics, in relation to the body corporate expenses, are in the process of evaluating the current operational cost structures of both the body corporate and the Company The BRPs have limited costs where possible through interaction with Hilton s management team The BRPs have and will continue running the Hotel in order to preserve the goodwill and the operations of the Hotel. Pezula Resort Hotel & Spa (Pty) Ltd Page 18 of 44

19 The BRPs have in addition: Suspended the financial control of Hilton in respect of the Company s FF&E reserves; Suspended the financial control of Hilton over the Company s banking accounts; The BRPs are currently in control of the day to day management of the day to day operational expenditure and banking accounts Steps and initiatives taken to seek investment and skills: The BRPs engaged with Village and Life Group being an established operator within the hotel and tourism industry in South Africa. The Group provided the BRPs with valuable insight into the industry norms in respect of cost structures and general hotel operations The BRPs also engaged extensively with the Shareholder, Hilton and VNL regarding alternative cost structures and the option of rebranding the Hotel The BRPs have negotiated the termination of the Hilton Management Agreement and are engaged in negotiations for the appointment of VNL as its successor Termination of the Hilton Management Agreement The BRPs have negotiated the termination of the Hilton Management Agreement effective 31 May 2018 subject to payment of all fees and charges due to Hilton in respect of services rendered up to the end of May All amounts that have been paid to Hilton as at the Adoption Date, in respect of both Pre- Commencement Claims and Post Commencement Claims, shall be as full and final settlement of any and all Claims that Hilton may have against the Company, including but not limited to any Claim/s for damages as a result of early termination of the Hilton Management Agreement or otherwise. Pezula Resort Hotel & Spa (Pty) Ltd Page 19 of 44

20 4.5 A complete list of all the material assets of the Company Summary of Assets as at end April 2018 at fair value: Immovable Property - Encumbered - Immovable Property - Unencumbered - Movable Assets - Unencumbered - Movable Assets - Encumbered Equipment Vehicles - Plant and Machinery - Computers - Furniture and Fittings - Other - Stock Debtors Bank Prepayments Floats and Petty Cash All movable assets are encumbered by a general notarial bond in favour of Cii Hotel and Resorts. Please see Annexure A for a list of the encumbered Assets 4.6 A complete list of the Creditors and Employees of the Company Please see Annexure B for a complete list of Creditors. 3 Section 150 (2) (a) (i) 4 Section 150 (2) (a) (ii) Pezula Resort Hotel & Spa (Pty) Ltd Page 20 of 44

21 4.6.2 Annexure B indicates the Creditors corresponding voting interests as well as whether or not they are Secured Creditors, Preferent Creditors or Concurrent Creditors, related or unrelated, as well as Pre- or Post- Commencement Claims Please see Annexure C for a list of Employees Summary of liabilities as at end April 2018: Secured ( ) Security held over Debtors Security held over Operating Lease - Security held over Movable Assets ( ) Security held over Immovable Assets Preferent ( ) SARS ( ) Employees - Concurrent ( ) Independent Parties ( ) Related Parties Operating Lease - Shareholders Loans ( ) Unit Holders ( ) Post Commencement Unit Holders ( ) Provisions ( ) Provision Business Rescue Costs ( ) ( ) Pezula Resort Hotel & Spa (Pty) Ltd Page 21 of 44

22 4.7 The probable liquidation dividend that would be received by Creditors The liquidation scenario is based on the BRPs professional judgement. Affected Persons are however cautioned to apply their own mind, and take independent advice, on the figures, assumptions and calculations provided by the BRPs in this BR Plan The probable liquidation dividend representing the amount that Creditors would receive, in their respective classes, if the Company was to be liquidated is set out below, reflecting the costs associated with a liquidation of the Company, as calculated in terms of Section 89 of the Insolvency Act The calculation below depicts the probable liquidation scenario and the following assumptions have been made in the calculation: That the Assets of the Company were sold at the forced sale / Auction Value of these Assets (which is unlikely to realise market-related values); That the liquidation was an unopposed ex parte application; That the estate is wound-up in two years; That the encumbered Assets subject to instalment sale agreements were taken into the possession of the Secured Creditors in accordance with the provisions of section 83 of the Insolvency Act; That the Secured Creditors insured their Assets and that there was no removal or storage payable on them by the estate; That the auctioneer does not charge for the advertising of the sale of Assets; Creditors other than Suite Owners will rank pari passu with Suite Owners in a liquidation, with the outcome for them being significantly worse than that proposed in terms of this BR Plan (which proposes full payment of their Claims in the ordinary course of business); That there were no enquiries held in to the affairs of the Company; That there were no extensions requested for the filing of a liquidation & distribution account; That the liquidators did apply for an increase in their remuneration and that the Master rejected the application. 5 Section 150 (2) (a) (iii) Pezula Resort Hotel & Spa (Pty) Ltd Page 22 of 44

23 4.7.4 Liquidation Calculation: Unencumbered Assets 100% Assets Min: 0.10 Liquidators Fees ( ) 0.14 VAT (44 914) 0.10 Auctioneers Fees ( ) 0.14 VAT (44 914) Masters Fees (17 012) Pro rate master's fees + R100 ( ) (Ratio R5,000.00=R25.00) Award to General/Special Notarial Bond Total Costs Transfer to Free Residue Encumbered - Boutique Shop and F & B 30% Assets Min: 0.10 Liquidators Fees (34 778) 0.14 VAT (4 869) 0.10 Auctioneers Fees (34 778) 0.14 VAT (4 869) Masters Fees (1 844) Pro rate master's fees + R100 (81 138) (Ratio R5,000.00=R25.00) Total Costs Transfer to Free Residue Other Assets 20% Assets Min: 0.03 Liquidators Fees (5 567) 0.14 VAT (779) 0.03 Auctioneers Fees (5 567) 0.14 VAT (779) Masters Fees (984) Pro rate master's fees + R100 (13 676) (Ratio R5,000.00=R25.00) Total Transfer to Free Residue Pezula Resort Hotel & Spa (Pty) Ltd Page 23 of 44

24 Debtors 80% Assets Min: 0.10 Liquidators Fees (97 300) 0.14 VAT (13 622) 0.10 Legal Fees (97 300) 0.14 VAT (13 622) Masters Fees (5 160) Pro rate master's fees + R100 ( ) (Ratio R5,000.00=R25.00) Cession of Debtors 0.00 Transfer to Free Residue Transfer to Concurrent 0.00 Free Residue Asset Realization Costs of Application Statutory Advertisements Postage and petties Storage of Books and Records The cost of valuing the loose assets The bond of security for 2 years Bank and Cash Reserves Liquidators Costs on Cash Reserves 1% Business Rescue Fees and Liquidation Application Costs Post Commencement Finance Available for Distribution/ (Contributions Required) Total Preferent Employee Costs Section 98 A Award to Employees (Cents in the Rand) 0.00 Total Preferent SARS Section Award to SARS (Cents in the Rand) 0.00 Total to Secured Creditors Award to Secured Creditors 0.00 Total Concurrent creditors Total Concurrent Portion of Employee claims Total Concurrent portion of Secured Creditors 0.00 Award to Concurrent Creditors 0.00 Total Shareholders Loans Award to Shareholders 0.00 Total Shortfall Costs of Liquidation Probable Award to Secured Liabilities 0.00 Award to Employees (Cents in the Rand) 0.00 Award to SARS (Cents in the Rand) 0.00 Pezula Resort Hotel & Spa (Pty) Ltd Page 24 of 44

25 Award to Concurrent Creditors 0.00 Award to Shareholders Secured and Preferent Creditors, with administration costs incurred in the course of the winding-up, will receive part-payment in respect of their Claims. Concurrent Creditors will not receive a dividend. The Shareholder will receive no dividend in the liquidation proceedings of the Company. 4.8 Further Consequences of Liquidation Room Revenue Agreements: The Room Revenue Agreements will be treated as executory contracts on a liquidation of the Company. The effect thereof will be that the liquidator will step into the shoes of the Company and have an election either to continue with or cancel the Room Revenue Agreements. The BRPs are of the view that a liquidator may elect to continue with the Room Revenue Agreements. The failure to do so would be value destructive and accordingly against the best interests of the Suite Owners and the general body of Creditors Main Hotel Building: The main Hotel building does not form part of the common property and is separately owned by Buffshelfco. It is likely that in a liquidation of the Company, Buffshelfco will retain its rights of ownership in respect of the main Hotel building and this will contribute to further value destruction on the part of the Suite Owners A liquidation of the Company will likely result in the separation of the main Hotel building from the Units with the possibility of the main Hotel building operating independently of the Units. This could be an additional factor contributing to further value destruction Claims of Suite Owners: In a liquidation, the Claims of the Suite Owners will be treated as unsecured Concurrent Creditors, ranking pari passu with Claims of all other Concurrent Creditors, with a prospect of little or no dividend Body Corporate: The dispute between Buffshelfco as the largest participating member of the body corporate and the remaining Suite Owners will remain unresolved. Pezula Resort Hotel & Spa (Pty) Ltd Page 25 of 44

26 4.9 A complete list of the holders of the Company s issued securities As at the Commencement Date, the authorised capital consisted of 1000 ordinary shares of R1 each and 100 shares had been issued to the Shareholder The BRPs remuneration The BRPs have and shall continue to invoice the Company at a rate per hour which is in line with the Regulations A statement whether the BR Plan includes a proposal made informally by a Creditor This BR Plan was prepared after engagement and consultations with Affected Persons and contains proposals made informally by the Shareholder, VNL and the Working Committee, formulated as set out herein by the BRPs. 6 Section 150 (2) (a) (iv) 7 Section 150 (2) (a) (v) 8 Section 150 (2) (a) (vi) Pezula Resort Hotel & Spa (Pty) Ltd Page 26 of 44

27 5. Part B Proposals The nature and duration of any moratorium for which the BR Plan makes provision The moratorium in terms of Section 133 of the Act shall remain in force and operational until the Substantial Implementation Date. 5.2 The extent to which the Company is to be released from and/or the repayment of their debts are restructured If this BR Plan is adopted and implemented as contemplated in Section 152 of the Act, Claims against the Company will be compromised and/or discharged on the terms and conditions of this BR Plan, with all Creditors restricted to the enforcement of their Claims to the terms and conditions of this BR Plan, thereby losing all rights to enforce any Claims or any part thereof against the Company save and except in terms of this BR Plan This BR Plan does not affect the rights of any Creditors to pursue Claims against persons who stood as surety for the debts of the Company This BR Plan does not propose the conversion of any debt to equity in the Company, or any other company The Claims of all Creditors shall not generate any interest as from the Commencement Date. 5.3 Payment Proposal to Creditors Proposal to the Post Commencement Financier The Post Commencement Financier shall be paid in full in accordance with the terms of the Post Commencement Finance agreement to be concluded between the Post Commencement Financier and the BRPs. 9 Section 150 (2) (b) 10 Section 150 (2) (b) (i) 11 Section 150 (2) (b) (ii) Pezula Resort Hotel & Spa (Pty) Ltd Page 27 of 44

28 5.3.2 Proposal to Trade Creditors All known Creditors with Claims in the ordinary course of business (excluding Hilton in respect of its Pre-Commencement Claims, Suite Owners, CII Hotel and Resorts, the Shareholder and related parties) shall continue to be paid in full in the ordinary course of business according to the respective agreements validly and lawfully concluded prior to the Commencement Date with these Creditors Excess Cash Provision The financial projections have been prepared based on the assumption that there will be sufficient Excess Cash to give effect to any proposed repayments to the Creditors envisaged in In the event that there is insufficient Excess Cash, payments to Creditors envisaged in will be suspended until sufficient Excess Cash is achieved and available for the proposed repayments to be made, excluding all trading obligations. Payments suspended in this manner will be subject to accelerated payment once there is sufficient Excess Cash Proposal to Suite Owners Legal Costs Payment of R to Werksmans Attorneys for legal fees incurred by Suite Owners Proposal Options In addition to Suite Owners shall be entitled to exercise an election between Proposal 1 or Proposal 2 as set out below: Proposal 1: The Conclusion of a new Uniform Rental Agreement with Suite Owners that elect this proposal on the terms and conditions of the Uniform Rental Agreement attached and marked Annexure G; Payment of R per Unit in respect of Post Commencement Claims; and Issuing of VNL Money Vouchers of R per Suite Owner in respect of Pre-Commencement Claims. Pezula Resort Hotel & Spa (Pty) Ltd Page 28 of 44

29 Proposal 2: Suite Owners shall be entitled to sell their Units to VNL at a purchase consideration of R inclusive of VAT (if applicable) per Unit, inclusive of all and any Pre- and Post Commencement Claims in terms of a written deed of sale (see Annexures I1 and I2) Should any particular Suite Owner fail to make an election between Proposal 1 or 2 above within 14 days from the Adoption Date, they shall be deemed to have elected Proposal Cession of Claims: The Claims of Suite Owners shall be ceded and transferred to K upon payment of the above proposals All Claims of Buffshelfco and VNL as at the Adoption Date shall be ceded to K Body Corporate The BRPs shall, in conjunction with the trustees of the body corporate and Nolands Forensics, make the necessary recommendations to Suite Owners for: Formalising and reconstituting the body corporate to the extent necessary; Adopting a budget for the proper functioning of the body corporate; Dealing with the common property to the extent necessary; To facilitate and mediate the resolution of the dispute between Buffshelfco and the remaining Suite Owners regarding the future operation of the body corporate and to make further proposals regarding the existing claims between the parties Proposal to Hilton Hilton s Pre-Commencement Claims shall be ceded to the Shareholder. Pezula Resort Hotel & Spa (Pty) Ltd Page 29 of 44

30 Hilton s Post Commencement Claims shall be paid in full All amounts paid to Hilton as at the Adoption Date, in respect of both Pre-Commencement Claims and Post Commencement Claims, shall be in full and final settlement of any and all Claims that Hilton may have against the Company, including but not limited to any Claim/s for damages as a result of early termination of the Hilton Management Agreement or otherwise. 5.4 Proposal to Shareholder Subordination and Cession of Claims To the extent required for solvency purposes, the Claims of the Shareholder, CII Hotel and Resorts and related parties shall be retained against the Company and subordinated in favour of all other Creditors, save for the secured portion of the claim of CII Hotel and Resort The Claims of the Shareholder shall be ceded to K in terms of the sale of shares agreement and the fulfilment of all conditions thereof. 5.5 The property of the Company that is to be available to pay Creditors claims It is not envisaged that any property of the Company will be needed to be made available to pay the Claims of Creditors. 5.6 The order of preference in which the proceeds of the sale of property will be applied to pay Creditors It is not envisaged that any property of the Company will be needed to be made available to pay the Claims of any Creditors. 12 Section 150 (2) (b) (iv) 13 Section 150 (2) (b) (v) Pezula Resort Hotel & Spa (Pty) Ltd Page 30 of 44

31 5.7 The benefits of adopting the BR Plan as opposed to benefits that creditors would receive if the Company were to be placed in liquidation Having regard to the anticipated liquidation dividend referred to above, there is no benefit or advantage to any Affected Persons in the event of a possible liquidation. In addition, should the Company be placed in liquidation and the liquidation process is completed to its final conclusion, it would take at the very least 18 to 24 months in a liquidation of this nature The proposals in this BR Plan provide for a better return and outcome for Affected Persons than what would transpire in the event of a liquidation of the Company The remuneration of the BRPs is substantially lower than the remuneration a liquidator would be entitled to if the Company were to be liquidated Creditors will receive a far better outcome than a liquidation, with Creditors, other than Suite Owners, the Shareholder, CII Hotel and Resorts and related parties, standing to receive full payment, excluding interest from the Commencement Date, of their Claims Costs of realisation of assets such as auctioneer s commission, advertising costs, storage costs and the like will not have to be incurred if the BR Plan is adopted and implemented Costs normally associated with liquidation such as Master s fees, bonds of security and taxed bill of costs in the liquidation application will not have to be incurred The BR Plan attempts to save all jobs and the importance of this cannot be understated given the intention of the Legislature when enacting this business rescue legislation The liquidation scenario is juxtaposed to the business rescue scenario in the table below: Preferent Creditors Employees Business Rescue Retention of employment for all employees. Liquidation No dividend in respect of their preferent portion of their claims in liquidation, with no certainty in respect of their continued employment. 14 Section 150 (2) (b) (vi) Pezula Resort Hotel & Spa (Pty) Ltd Page 31 of 44