Rockwell - update regarding subsidiaries
Rockwell (the "company") provided an update to the interim liquidation application brought by C-Rock Mining Ltd. (‘’CML’’) against three subsidiaries of the company, which resulted in a provisional winding-up order having been issued by a judge in Kimberley, South Africa on March 23, 2017 in respect of Rockwell Resources RSA (Pty) Ltd (Rockwell RSA), HC van Wyk Diamonds Ltd (HC van Wyk) and Saxendrift Mine (Pty) Ltd. (Saxendrift).
The company’s subsidiaries again attended in court in Kimberley, South Africa on May 18, 2017. The only issue at hand in the hearing was three applications to have the three subsidiaries placed in business rescue (as opposed to liquidation). The application was successful. The orders placing the subsidiaries in business rescue support the company’s contention that there is a reasonable prospect of rescuing the subsidiaries and restoring them to long -term profitability.
The effect of the order is that the joint business rescue practitioners will oversee the affairs of the subsidiaries, work alongside the company’s management to right the businesses of the subsidiaries, and prepare a business rescue plan (to be approved by creditors of the subsidiaries) aimed at ensuring a return to commercial operations. The immediate effect is that all legal proceedings against the subsidiaries are stayed, and the liquidation process is suspended. The company will also pursue its criminal and civil claims against CML and certain individuals involved in the business of CML.
The business practitioners are Messrs. Peter van den Steen and Trevor Murgatroyd of Metis Strategic Advisors, who have been appointed by the Court on an interim basis, subject to ratification by creditors within the next 10 business days. They will be in contact with the creditors of the subsidiaries in the next week to make the necessary arrangements. In addition, they will work with management to review and refine the current business plan and assess whether there are further opportunities for optimization and implementation of the plan and report and represent progress to the creditors. The strategy remains the completion of the ramp-up of Wouterspan Mine to full production and to assess and where feasible implement measures to further increase production. A strategic review of all assets and opportunities will be conducted to assess possibilities of realizing short term value which may assist in expediting the repayment of creditors, and to ensure the businesses have sufficient capital to return to normal commercial operations where required.
Business rescue is similar to Canadian work out arrangements, although a major distinction in South Africa is that commercial decisions are made by the management of the company in business rescue (the business rescue practitioners and directors), not the judge which is the practice in Canada. One similarity to the Canadian process is that the company will need a court order to exit business rescue and to do so, the practitioners will have to be satisfied that the business is sound enough to meet its obligations as they fall due for the subsequent s ix months after exit.
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