Transaction Capital’s debt battle to unbundle WeBuyCars

Transaction Capital is considering unbundling WeBuyCars and listing it separately on the JSE, but it may be easier said than done.

Transaction Capital CEO Jonathan Jawno recently said they are exploring the unbundling in partnership with WeBuyCars founders Faan and Dirk van der Walt.

“We are exploring the merits of unbundling Transaction Capital’s shareholding in WeBuyCars with its subsequent listing on the main board of the JSE,” Jawno said.

WeBuyCars is the most valuable asset in Transaction Capital’s stable and continues to generate good returns despite challenging trading conditions.

However, while the deal sounds good on paper and will benefit shareholders, there may be a stumbling block when it comes to debt holders.

Jean Pierre Verster from Protea Capital Management told Business Day TV that unbundling WeBuyCars from Transaction Capital would be bad news for debt holders.

He explained that Transaction Capital would unbundle its most valuable part, WeBuyCars, while leaving the debt in the group.

“You essentially leave debtholders with an empty shell,” he said. “If Transaction Capital gets it right, it will be one of the worst draftings of a lender agreement ever.”

“If they get it right, kudos to them. It will be a great negotiation in terms of the debt agreements they have.”

Verster expects it to be challenging for Transaction Capital to unbundle WeBuyCars and list it separately without the debt holders protesting.

One advantage is that most of Transaction Capital’s debt is ringfenced within SA Taxi. There is some leakage into Nutun and WeBuyCars, but it is not substantial.

“The worst-case scenario is that SA Taxi goes bust and that WeBuyCars and Nutun survive,” Verster said. It is a good outcome for shareholders but bad for debt holders.

Wayne McCurrie from FNB Wealth and Investments said that while the debt may be ringfenced legally, the reality looks very different.

He said if Transaction Capital unbundles WeBuyCars and leaves the debt holders hat in hand, it will make life difficult for the company later.

“If the Transaction Capital guys walk away and leave the debt holders taking all the pain, it will be difficult to get more financing in future from anyone in the industry,” he said.

“Legally, the debt may be ringfenced. However, morally, you stood behind these loans. The banks expect you to make good on the loans,” he said.

“If you don’t repay the debt, the banks will say, ‘That’s it – you are not getting any more credit from us’. This is a very small community.”