Softline has revised the terms of agreement related to the restructuring of its interest in US-based SVI, which is unable to repay a $12.3 million loan.
The JSE-listed company holds about 48.7% of SVI's voting rights, and holds a loan, which, including accrued interest, amounts to $12.3 million.
Softline has stated its intention ultimately to exit from its investment in SVI in line with a focus on its core business.
"Management is further concentrating efforts in its accounting and payroll operations, with a focus on continued growth of market share in SA, Australia, the USA and Canada," it says.
It intends to exchange 10.7 million common shares into $8.8 million cumulative, convertible preferred shares ("preferred shares"), which it expects will assist SVI in its efforts to raise new capital, provide Softline with cumulative preferential rights to dividends and elevate Softline's status to a preferred shareholder.
"SVI is currently unable to repay the loan in cash and Softline has therefore agreed that SVI repay the loan in specie with an issue of preferred shares in SVI and the transfer of an asset being an effective holding of shares in Integrity Software.
"The repayment of the loan in this manner will strengthen SVI's balance sheet by significantly reducing its primary debt level and assist SVI in raising new capital," it adds.
The loan is to be repaid in specie by the receipt of SVI's interest in Integrity having a book value of $7 million and the issue of $5.3 million preferred shares to Softline. SVI's interest in Integrity is held in the form of a convertible note exchangeable into 1.536 million shares of Integrity (11% of Integrity).
SVI will issue a further $8.8 million preferred shares to Softline in exchange for 10.7 million SVI common shares currently held by Softline. As a result, Softline's holding in SVI will be reduced from 48.7% to 21.3%, plus $14.1 million preferred shares.
Softline's effective interest in Integrity will increase from the current 4% to about 15%.
Softline says that the business of Integrity is comparable and synergistic to that of Softline - the development and implementation of accounting and payroll software to small and medium-sized organisations.
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