The financial deterioration of Phumelela Gaming and Leisure (‘PGL’ or ‘the Company’), the largest operator of horseracing in South Africa, has been well documented.
Turf Talk report that the implications of the National Covid-19 lockdown have exacerbated its problems to the extent that today, Friday 8 May, the PGL Board passed a Resolution resolving that the Company go into Business Rescue.
The decision to opt for Business Rescue was preferred to liquidation because the board of PGL (‘Board’) believe there is a prospect of rescuing the business.
The Board took this decision with the knowledge of a Post Commencement Finance (‘PCF’) deal agreed with Mary Oppenheimer Daughters Pty Ltd (‘MOD’). The PCF was offered by MOD subject to several conditions, including the Board making the decision to initiate Business Rescue.
PGL is central to the operation of the horseracing industry, and the failure of PGL would have a devastating impact on the entire industry. It was for this reason that Charles Savage was mandated by MOD some time ago to engage with PGL. The primary objective was to create a sustainable strategy specifically for horse racing in South Africa. At different points in time Mike de Kock, David Abery, Wéhann Smith, and Brian Riley have joined Charles in these endeavours.
In February 2020, Susan Rowett as Chairperson of the National Horseracing Authority called a meeting of several directors and officers of the various industry bodies. In this and subsequent meetings a decision was made to create a Restructuring Task Team (‘RTT’) to engage with PGL with a view of safeguarding, re-capitalizing, and restructuring the racing industry. The RTT comprising the abovementioned individuals were accordingly mandated by MOD and supported by the industry.
Importantly, none of these individuals, who together comprise the Restructuring Task Team (‘RTT’), are being remunerated for their work. They have offered their skills as they are fully aligned and committed to MOD’s objective as set out above.
It is anticipated that the injection of PCF will allow PGL to meet its financial obligations for the duration of the Business Rescue process, importantly including the payment of stakes at levels agreed with the Racing Association during April 2020.
Furthermore, the deal provides the RTT with the opportunity to negotiate and work with the Business Rescue Practitioner, and though his office with creditors and other stakeholders, with a view of restructuring and recapitalizing the business, thus ensuring the continuance of a viable horse racing industry.
“It must be stressed that the opportunity will be short-lived and will rely on all stakeholders having to make significant compromises. Government will be a crucial stakeholder in the future of racing, and while there has been positive engagement, a lot of work remains.
Many of the negotiations have been and will continue to be subject to non-disclosure agreements.
We have been able to ensure payment of stakes, albeit reduced, for the foreseeable future. The RTT will communicate with all stakeholders as and when we are able to do so,” said a spokesperson for the RTT.
Image: Jessica Jell and Mary Slack // Candiese Lenferna