An exciting new era for Cape Racing
The trustees of The Thoroughbred Horseracing Trust (the “Trust”) and the board of directors of Kenilworth Racing Pty Ltd (“KR”) (collectively, the “Trustees and the board of KR”) have issued a joint press on Tuesday July 5, 2022, in which they updated all stakeholders on certain proposed transactions which will have a significant impact on the future of racing in the Western Cape.
As has been publicly disclosed on numerous occasions, KR is experiencing severe liquidity and cash flow constraints. In short, the current situation is such that without immediate action, KR could be forced to cease operations imminently.
In light of these critical issues, KR’s Trustees and Board have worked tirelessly to identify immediate and sustainable sources of cash to allow racing to continue in the short term, as well as solutions to ensure viability. and the long-term health of racing in the Western Cape for years and decades to come.
To that end, the KR Trustees and Board of Directors are pleased to announce certain developments intended to achieve these goals.
First, KR’s Board of Directors approved and signed an Expression of Interest (EOI) with GMB Investments (Pty) Ltd (“GMB”), a company represented by Cape Town-based owner Gregory Bortz.
This EOI provides that GMB, upon receipt of the necessary regulatory approvals and subject to certain closing conditions, will immediately provide 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 of debt owed by KR to its current lender.
In addition to the normal and customary terms typical of such financing agreements, GMB will receive an option from KR to subscribe to an equity interest in KR exercisable upon a change of control transaction at KR (the “GMB Option”).
Separately, the trustees of the Trust have countersigned a memorandum of understanding with Hollywood Sportsbook Holdings (Pty) Ltd (“Hollywoodbets”) for the purchase of all shares and debt securities of the Trust in KR (the “Hollywoodbets Transaction”).
Hollywoodbets has agreed to inject a minimum of R200 million in cash into KR following the successful closing of the Hollywoodbets transaction. The parties intend to work together as soon as possible to move from the MOU phase to the execution of the definitive purchase and sale documentation. The closing of these transactions will be subject to various approvals, including, but not limited to, the National Horse Racing Authority of Southern Africa (“NHRA”),
The Western Cape Gambling and Racing Board (“WCCGB”) and competition authorities. These regulatory approvals can take a long time.
Upon final closing of the Hollywoodbets transaction and exercise of the GMB Option, there will be two shareholders in KR, namely Hollywoodbets and GMB.
In signing the EOI and Memorandum of Understanding, KR’s Trustees and Board sought a lasting solution for Cape Racing that would enclose the jewel in Cape Town’s crown, Kenilworth Racecourse. We are pleased to report that the MOU contains (in addition to the very significant cash injection into KR) a provision for the cantonment of Kenilworth Racecourse.
Hollywoodbets has already shown its commitment to horse racing in South Africa through its extensive ownership and sponsorship of racehorses, and remains steadfastly focused on promoting and redistributing the sport it is so passionate about.
Hollywoodbets involvement will ensure that thousands of jobs in and around the horse racing industry are maintained and secured. Additionally, Hollywoodbets mostly holds a broad-based Black Economic Empowerment Tier 3 status.
Additionally, their dedication to providing exceptional customer service will invariably help KR provide the best possible experience for owners and punters in the province.
We are further excited at the prospect of having Greg Bortz’s involvement post-implementation of the transaction – not just in terms of his capital, but in terms of his time and expertise.
In addition to being a prominent and passionate owner in South Africa, Mr. Bortz’s professional background involved investing in and restructuring companies in operational and financial difficulty. We believe that his turnaround expertise and guidance, coupled with his passion and knowledge of horse racing, will help the Board restore KR to the status it deserves.
Following the closing of the Hollywoodbets transaction and the exercise of the GMB Option, Mr. Bortz is expected to serve as Executive Chairman of KR.
As noted earlier in this release, changes to KR’s ownership and board of directors are subject to the receipt of prior regulatory and other approvals. We are unable to estimate the timing.
In the meantime, the GMB funding will allow KR to continue racing operations in preparation for exciting developments when the two transactions close.
We would like to specifically acknowledge the past support of Mary Slack and her family which, over a period of more than two years, helped KR overcome significant liquidity hurdles, and for which we are very grateful.
Although new ownership and management can only begin once all regulatory approvals and conditions have been met, we are excited about what lies ahead once the new team takes the helm.
Most importantly, we are extremely pleased that the future and sustainability of horse racing in the Western Cape has been secured for generations to come.
The Trust and KR will provide regular update announcements as relevant new information becomes available.