This document discusses two case studies of companies, Southgold Exploration Pty Ltd and On Digital Media t/a Top TV, that underwent business rescue in South Africa. For both companies, significant discounts were achieved through business rescue, with Southgold seeing an 83% discount and On Digital seeing a 92% discount. However, both cases were also extremely complex, time-consuming, and resource-intensive due to issues such as multiple jurisdictions, regulations, politics, and litigation. The document emphasizes that while business rescue can preserve asset value, complexity drives up costs, and regulatory barriers remain a challenge in South Africa. Experienced advisors like business rescue practitioners and legal counsel are essential to navigate complex business rescue cases.

1. Opportunities
> Different types of distressed assets
> Pre-business rescue, during business rescue and after business
rescue – focus today is on during business rescue
> Many successful business rescues have resulted from some form
of investment
> Business rescue is a creditor driven process
> Distressed investment environment in South Africa is young and
undeveloped
> Business rescue legal framework offers protection and “space to
put together a deal”
> Practitioner (neutral and independent) takes the deal to
stakeholders – avoids, or at least mitigates, the dangers of the
over or under selling to stakeholders by management or board.
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2. Challenges
> Its not ordinary M&A - very technical from a legal
perspective
> Can be litigious - militant creditors
> Regulatory environment in South Africa is a deterrent
> Within business rescue it is emphasised --> clock speed (the
potential discount for an 'intact asset' makes up for the pain)
> All stakeholders’ interests need to be balanced to avoid
failure due to litigation and/or unnecessary delays and/or
'no' votes
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3. Southgold Exploration Pty Ltd
> PCF providers -
> Standard Chartered
> Credit Suisse
> Combined Exposure R2.6b - secured
> Why business rescue?
> Care and Maintenance costs - approximately R200m for
South Africa only
> Other creditors –
> Noteholders - R1.0 billion
> Trade creditors - R0.3 billion
> Inter-company / shareholders loans - R7.0 billion
> Total - R11b
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4. Southgold Exploration Pty Ltd
> Business rescue practitioner appointed –
> BRP legal team – business rescue legal, M&A legal
> JP Morgan - Transaction advisory
> KPMG - financial modelling, creditor verification, advisory
> Terra consulting - valuations
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5. Southgold Exploration Pty Ltd
> Regulators and government –
> DMR (6 to 7 months)
> Competition com (2 weeks for the Witsgold deal, 3.5
weeks for Sibanye/Witsgold deal)
> DWAF
> NNR
> SARS (more than a year to settle)
> SARB
> Local municipal and community structures
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6. Southgold Exploration Pty Ltd
> Witsgold offer –
> R75m on deal closure
> Fixed repayment schedule to lenders for R600m over
current LOM
> R1.2b flex payment schedule to lenders based on FCF
> Further R680m to lenders based on 10% FCF participation
over any additional LOM (if any)
> Option to settle without penalty
> 36 month interest moratorium
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7. Southgold Exploration Pty Ltd
> Witsgold bought an asset which swallowed an initial investment of
R11 billion before it went into rescue for approx R1.9 billion (PV)
> Discount - 83%
> Duration - 21 months
> Level of complexity - extremely complex
> Various jurisdictions - Switzerland, English, Canada, United States
of America
> Canadian CCMA and Receivership
> USA Chapter 11 proceedings
> Time zones - conference calls with callers on various time zones -
(worst was Vancouver, NYC, Toronto, London, JHB, Zurich,
Singapore, Beijing) - it’s a killer
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8. On Digital Media t/a Top Tv
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> PCF providers –
> shareholders stopped funding - had nothing
> approached creditors
> secured creditor - DBSA consent (DBSA R200mil exposure)
> monthly subscription fees
> business 'as usual' - trading entity
> Other creditors –
> IDC -approx R900 million total exposure
> NEF - R100 million
> trade creditors - R400 million
> Total - approx R1.4 billion

9. On Digital Media t/a Top Tv
> Business rescue practitioner appointed advisors –
> business rescue legal team – business rescue legal, M&A legal
> KPMG – valuation
> ODM CEO - domain expertise
> ODM CFO – finance and modelling
> Regulators and government –
> ICASA
> DOC
> Competition commission (deal did not require approval,
investigations into anti-comp behaviour by Multichoice)
> SARB (claims bought by ST)
> Electronic Communications Act (ECA) - limitation on foreign
ownership of a broadcast license
> New BEE consortium (still confidential)
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10. On Digital Media t/a Top Tv
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> StarTimes offer –
> R45 million to trade creditors (15c/R)
> R30 million to DBSA
> existing shareholders kept in but severely diluted
> new BEE
> split into 2 companies - broadcast company, services company
> further investment of R1 billion in business plan

11. On Digital Media t/a Top Tv
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> StarTimes have invested in an asset which swallowed an initial
investment of R1.4bil before it went into rescue for approx R106
million
> Discount - 92%
> Duration - 20 months and counting
> Level of complexity – extremely complex (but for other reasons)
> politics and agendas
> rogue offer (MSG Africa backed by Multichoice)
> litigation
> regulatory - DOC, ICASA, SARB
> cross-border and cross-cultural issues
> virtually every major supply contract has been re-negotiated
> almost all technical platforms have been migrated (uplink stations, fibre links, play-
out facilities, redundancy systems)

12. Summary
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> Business rescue can keep an asset whole as opposed to non-
business rescue solutions
> Big becomes, complex and becomes expensive - underlying
value is essential
> Time consuming and resource hungry
> Deep discounts are made possible
> Ultimately builds goodwill with stakeholders
> Young law - experienced advisors and business rescue
practitioners are essential and also scarce
> Every business rescue presents its idiosyncrasies - there is no
'cookie cutter' approach
> Regulatory environment and other laws do not speak to BR 
need to know how to navigate the 'waters‘
> PCF remains a challenge and will do so until distressed
investment (debt and equity) market develops

13. THE ROLE OF WERKSMANS
AS LEGAL ADVISOR
Eric Levenstein, Director