The trustees of The Thoroughbred Horseracing Trust (the “Trust”) and the board of directors of Kenilworth Racing Pty Ltd (“KR”) (collectively, the “Trustees and KR Board”) issued a joint press release on Tuesday 5 July 2022, wherein they informed all stakeholders of certain proposed transactions that will have a significant impact on the future of racing in the Western Cape.
As has been publicly disclosed on numerous previous occasions, KR is experiencing severe liquidity and cash flow constraints. In short, the current situation is such that, absent immediate action, KR may be forced to imminently cease operations.
In light of these critical issues, the Trustees and KR Board have been working tirelessly to identify immediate and sustainable sources of liquidity to enable racing to continue in the near term, as well as solutions to ensure the long-term viability and health of racing in the Western Cape for the years and decades ahead.
To that end, the Trustees and KR Board are pleased to announce certain developments that are intended to achieve those objectives.
First, the board of KR has approved and counter-signed an expression of interest (EOI) with GMB Investments (Pty) Ltd (“GMB”), a company represented by Cape Town based owner Gregory Bortz.
Greg Bortz – brings strategic skills and experience to the table (photo: hamishNIVENPhotography)
This EOI provides that GMB, upon receipt of the necessary regulatory approvals and subject to certain closing conditions, will provide an immediate R130 million of liquidity to KR in the form of:
- (i) The granting of a R50 million working capital facility to KR; and
- (ii) The repayment of approximately R80 million in indebtedness owing by KR to its current lender.
In addition to the normal and customary terms typical of such financing arrangements, GMB will receive an option from KR to subscribe for an equity stake in KR exercisable upon a change of control transaction at KR (the “GMB Option”).
A new vision for a better future! (Pic – Chase Liebenberg)
Separately, the trustees of the Trust have counter-signed a Memorandum of Understanding with Hollywood Sportsbook Holdings (Pty) Ltd (“Hollywoodbets”) for the purchase of all the Trust’s shares and claims in KR (the “Hollywoodbets transaction”).
Hollywoodbets has agreed to make a minimum of R200 million cash infusion into KR pursuant to the successful closing of the Hollywoodbets transaction. The parties intend to work together as swiftly as possible to proceed from the MOU phase to the execution of definitive purchase and sale documentation. Closing of these transactions will be subject to various approvals including but not limited to The National Horseracing Authority of Southern Africa (“NHRA”),
The Western Cape Gambling and Racing Board (“WCGRB”) as well as The Competition Authorities. These regulatory approvals may take significant time to complete.
Upon the ultimate closing of the Hollywoodbets transaction, and upon the exercise of the GMB Option, there will be two shareholders in KR – namely Hollywoodbets and GMB.
Cape Racing – back out of the starting blocks (Pic – Chase Liebenberg)
In signing the EOI and the MOU, the Trustees and KR Board sought an enduring solution for Cape Racing that ringfenced the Cape’s crown jewel, Kenilworth Racecourse. We are pleased to announce that the MOU contains (in addition to the very sizable cash injection into KR) a provision for the ringfencing of Kenilworth Racecourse.
Hollywoodbets has already shown its commitment to horseracing in South Africa through its extensive racehorse ownership and sponsorship, and remains steadfastly focused on continuing to promote and give back to the sport it is so passionate about.
Hollywood Syndicate celebration on July day (Pic – Candiese Lenferna)
Hollywoodbets’ involvement will ensure that thousands of jobs in and around the horseracing industry are maintained and secured. In addition, Hollywoodbets importantly holds a Broad-based Black Economic Empowerment Level 3 status.
Furthermore, its devotion to providing outstanding customer service will invariably assist KR in providing the best possible owner and punter experience in the province.
We are further delighted at the prospect of having Greg Bortz’s involvement following the implementation of the transaction – not simply in terms of his capital, but in terms of his time and expertise.
In addition to being a substantial and passionate owner in South Africa, Mr. Bortz’s professional background involved investing in and restructuring operationally and financially challenged businesses. We believe his turnaround expertise and guidance, coupled with his passion for and knowledge of horseracing, will assist the board in returning KR to the status it deserves.
Post-closing of the Hollywoodbets transaction and the exercise of the GMB Option, it is anticipated that Mr. Bortz will serve as Executive Chairman of KR.
As stated previously in this release, changes to the ownership and board in KR are dependent upon the receipt of the prerequisite regulatory and other approvals. We are unable to estimate the timing thereof.
In the interim, the GMB financing will enable KR to continue its racing operations with an eye to exciting developments upon the closing of both transactions.
Mary Slack and family have assisted over the past two years
We would like to specifically acknowledge the prior support of Mary Slack and her family who for a period of over two years has assisted KR through significant liquidity hurdles, and for which we are most grateful.
While the new ownership and leadership can only commence once all regulatory approvals and conditions have been met, we are excited about what lies ahead once the new team assumes the helm.
Most importantly, we are extremely pleased that the future and sustainability of horseracing in the Western Cape has been secured for generations to come.
The Trust and KR will be providing regular update announcements as further pertinent information becomes available.
- For further information, please email enquiries to [email protected]
