IDC faces R90m loss as Guptas’ Oakbay delists
Suspension request followed failure to secure JSE sponsor Company shed 71% of market value in 2017 alone
The Industrial Development Corporation (IDC), which converted R256m of the loan owed to it by Oakbay Resources & Energy into equity when the Gupta-owned company listed in November 2014, says Oakbay is delisting from the JSE, but it would ensure that the development finance institution’s rights are not prejudiced.
The IDC converted interest on its loan to Oakbay into shares at R9 a share. Now those shares cannot be converted into cash, and with the share price at R5.80, the IDC will have to book a loss of about R90m.
Oakbay, which earned Atul Gupta a spot on the 2016 Sunday Times Rich List with a paper fortune of R10.7bn based on the company’s market capitalisation, has applied for the voluntary suspension of trading in its shares from the JSE after failing to secure a sponsor.
Earlier in July, River Group terminated its role as Oakbay Resources & Energy’s sponsor on the JSE.
The company had battled to convince it to replace Sasfin — which had also terminated its services. Former Oakbay Investments CE Nazeem Howa said the group had approached “every single” JSE sponsor to support the Oakbay listing, and the group was rebuffed by “every single one” of them.
The River Group decision was based on its “revised assessment of association risk surrounding the company and its shareholders”, Oakbay said.
In its announcement of the suspension of its shares during the last week of June, Oakbay did not hint at plans to delist, stating the suspension was being done on a “temporary basis”. Oakbay did not respond to requests for comment at the weekend.
IDC spokesman Mandla Mpangase said the finance institution would continue talks with Oakbay as the delisting process unfolded to protect its interests.
The institution had converted R256m in outstanding interest to equity in Oakbay when the company listed in November 2014. Oakbay was still liable for the repayment of R250m in the loan capital initially granted
to it. “The IDC’s expectation is that the process of delisting will be carried out in accordance with the law and with due regard to the rights of all minority shareholders, including the IDC,” Mpangase said.
“The company continues to honour and service its original loan agreement to date. The remaining balance of the loan facility is fully secured.”
In a response to parliamentary questions in 2016, IDC CEO Geoffrey Qhena said his organisation had registered bonds worth R250m over one of Oakbay’s mines to secure the loan, and had also made the company cede and pledge shares to it.
Oakbay has, however, lurched from loss to further losses since its listing and shed 71% of its market value in 2017 alone.
An unidentified person’s efforts allegedly to prop up Oakbay’s share price failed.
Last Monday, the Financial Services Board (FSB) said it had referred a case of market manipulation involving Oakbay shares to its enforcement committee after the person, who is not related to Oakbay, allegedly attempted to game the market on March 30.
“The enforcement unit will draft enforcement papers based on the directorate of market abuse’s investigation report when it takes the matter to the enforcement committee for a hearing,” Solly Keetse, head of the directorate, said on Friday.
Mpangase did not respond to questions on the FSB case. He said, however, that the IDC was on track to deliver full details of its lending to politically exposed persons such as the Gupta family, as Economic Development Minister Ebrahim Patel — who has political oversight of the IDC — has undertaken to do.
The finance institution will publish its annual report containing this information at the end of July.