Mercantile to fight claims of conspiracy

Mercantile Bank says it will oppose an application brought by Alert Steel liquidators, apparently on behalf of creditors, who are alleging a conspiracy between Mercantile and Alert Steel shareholders and are seeking R350m in damages.

“Disgruntled creditors” who had distorted the facts of the matter were behind the application, said Mercantile Bank CEO Karl Kumbier.

“We will oppose the application with everything we have.”

The timing of the application was suspicious, considering that Portuguese bank Caixa Geral de Depósitos was in the process of selling Mercantile, he said.

According to court papers, the plaintiffs include Alert Steel, which was liquidated in July 2014, and ArcelorMittal SA.

However, a spokesman for ArcelorMittal said its legal team was not aware of the case.

Kumbier said he had heard about the case via journalists on Sunday, receiving summons only on Monday.

It would appear that creditors including Credit Guarantee Insurance Corporation, are the driving force behind the case. Credit Guarantee, which is a subsidiary of Old Mutual Insure, declined to comment.

The plaintiffs claim that in May 2014, Mercantile Bank, some of Alert Steel’s directors and controlling shareholder Rayhaan Hassim devised a scheme to transfer Alert Steel’s assets to a new company held by Hassim, pay the company’s loan to Mercantile Bank and put the company in liquidation.

“The purpose of the scheme was to appropriate all the company’s assets for the benefit of Mr Hassim and Mercantile Bank at the expense of the company’s other creditors,” the plaintiffs claim. Withdrawing financial

support to Alert Steel and drawing up an invalid perfection agreement between the bank and the company to secure assets for the bank ahead of the liquidation were part of the scheme, they say.

But Kumbier said the application was full of factual inaccuracies. Mercantile Bank was entitled to call in the loan in terms of its agreement, as there had been a material deterioration in Alert Steel’s business.

While Alert Steel had been in business rescue, from May 2014 to July 2014, Kumbier said he had been in meetings with Credit Guarantee and had spoken to two listed companies about a possible sale.

The company entered liquidation in July 2014 and was later bought by Hassim, using his company West Lake Trade and Investments for R100m. Hassim also owns auction house Aucor.

The company’s assets were heavily undervalued, the plaintiffs claim, by one of the provisional liquidators, Chris de Wet, who made “material misrepresentations” in his application to the master of the high court to approve liquidation. The master granted De Wet’s application and the assets were sold to West Lake for R100m, the proceeds of which were paid to Mercantile Bank, prejudicing other creditors, they say.

The plaintiffs are seeking an order setting aside the perfection agreement and to see Hassim and Mercantile Bank ordered to pay Alert Steel R251m which, they say, was the true value of the assets, plus interest.

They are seeking an additional R100m from Mercantile.