Syndication directors hope to prevent R4.5bn liquidation - Pickvest ; Highveld ; PIC

Syndication directors hope to prevent R4.5bn liquidation

The boards of seven Pickvest syndication schemes have resolved that the companies be placed into voluntary business rescue. They have appointed business rescue practitioner Hans Klopper, who is best known for his appointment as joint liquidator of Consolidated News Agencies (CNA), back in 2003.

In total there are eight syndications in the Pickvest stable. However, only seven are envisaged for the business rescue, not eight as previously reported. Moneyweb apologises for the error. The syndication Highveld 19 is excluded.

Morkel Steyn, a director of all eight Highveld syndication schemes, says in an affidavit that it was “imperative” to implement the business rescue and protect investors from liquidation and “massive losses”.

Public investors have poured nearly R4.5bn into the eight Highveld syndication schemes. The lion’s share, roughly R3.5bn, has gone to the four most recent schemes, Highveld 19-22. These syndications find themselves in the precarious position of having paid for properties they don’t own, as reported by Moneyweb in April.

A business rescue is an option in the new Companies Act. If the directors of a company have reasonable ground to believe that a company is financially distressed, and there appears to be a reasonable prospect of rescue, they can implement a business rescue.

While under business rescue, a company is temporarily protected from people and entities that have claims against it. Thus, liquidation may be prevented.

By placing the eight companies in business rescue, Steyn is admitting that all is not well in the Pickvest portfolio.

In his affidavit he refers to a dispute between Bosman & Visser and Nic Georgiou’s Zelpy group of companies.

Bosman & Visser is an intermediary that stands between the Highveld syndications and the person they buy the properties from, apparent billionaire Nic Georgiou. The syndication companies would pay investors’ money to Bosman & Visser, who would deduct Pickvest’s fees and commission, and, in turn, transfer the remaining cash to Georgiou.

At some point Georgiou became suspicious that Bosman & Visser had been short-changing him, and requested an audit. Georgiou claimed he had been underpaid to the tune of R883m.

An audit was conducted by Calculus Chartered Accountants. Calculus supposedly gave Bosman & Visser a clean bill of health. To this day, a letter (dated May 27 2011) is published on Pickvest’s website that suggests the dispute between Bosman & Visser and Georgiou has been resolved.

This flies in the face of Steyn’s affidavit, dated September 7 2011. Steyn notes: “There is a dispute between Bosman & Visser and the Zelpi [sic] group of companies whether the whole purchase price in respect of the four companies of R3.2bn had been paid. The latter group maintains that there was a short payment of R883m.”

Steyn says: “When it was clear that litigation was unavoidable it was clear that in such a case liquidations would follow and it was also clear that investors would lose the major portion of their investments. In total there are about 80 different large building complexes. The losses due to forced sales, liquidation and litigation costs and the time during which investors would not have any income would convert to massive losses to investors.”

The business rescue does not appear to have derailed a rescue plan proposed by Georgiou. The plan, known as the Orthotouch deal, would see Georgiou retaining ownership of the buildings he was supposed to transfer to investors. He will promise to pay investors an annual return of 6%, escalating by 0.25% a year for five years, after which time, Georgiou promises to repay investors their entire capital.

At least one organised group of Pickvest investors is against the Orthotouch deal, and has vowed to vote against it. Investors are wary of Georgiou’s promises. After all, it was Georgiou who “guaranteed” Pickvest’s investment products. In April this year, Georgiou walked away from these obligations, with apparent ease, leaving investors with substantially lower income.

In his affidavit, Steyn notes that there are ongoing negotiations between Georgiou’s Zephan (previously Zelpy) and the Takeover Regulations Panel (TRP) regarding the proposed Orthotouch deal. The TRP’s job is to ensure that a proposed takeover complies with legislation, before it is presented to investors. The TRP makes no finding on the merits of the transaction – that is for investors to decide themselves.


Denny Crane

Denny Crane
It's not me ... yet. Denny Crane from the TV series Boston Legal. Click on picture if you're not sure who he is!