Absa ac­cused of at­tempt­ing to bully ex­otic car deal­er­ship into liq­ui­da­tion

Business Day - - FRONT PAGE - Ta­nia Broughton

Absa, one of the coun­try’s top four banks, has been ac­cused by an ex­otic car deal­er­ship of try­ing to bully it into liq­ui­da­tion with claims that it owes it more than R400m.

The own­ers of Bal­lito-based SMD Group, which sells Fer­raris, Porsches and Lam­borgh­i­nis, dis­pute the amount and said Absa had ig­nored an of­fer from a pri­vate eq­uity firm to buy the com­pany for al­most R200m.

SMD said the lat­est bank state­ment showed that it owed Absa only R157m.

The bank has de­nied act­ing in bad faith in the mat­ter and brought an ur­gent wind­ing-up ap­pli­ca­tion in the high court in Dur­ban a few days be­fore Christ­mas. Judge Gre­gory Kruger re­fused to con­sider the mat­ter, say­ing that it was not ur­gent. He or­dered Absa to pay SMD’s costs.

Ap­proached for com­ment, Absa head of com­mu­ni­ca­tions Phumza Macanda said: “Absa de­nies any al­le­ga­tions of wrong­do­ing in their en­tirety, ei­ther by it­self or on the part of its em­ploy­ees, and will re­spond fully to these al­le­ga­tions in the fur­ther con­duct of the liq­ui­da­tion ap­pli­ca­tion, with which it in­tends to per­sist.”

In his af­fi­davit Absa head of credit An­thony Evens said the ini­tial agree­ment with SMD had been for a R155m gen­eral and floor plan credit fa­cil­ity.

OVER­DRAFT FA­CIL­ITY

He said that since De­cem­ber 2017, SMD had tried to “trade its way out of trou­ble” and failed.

Evens said that in spite of sev­eral in­dul­gences, in­clud­ing a tem­po­rary in­crease in its over­draft fa­cil­ity, it had not been able to re­duce the debt.

The bank brought in a con­sul­tancy to as­sess the sit­u­a­tion. The con­sul­tancy, En­gaged Busi­ness Turn­around, was of the view that SMD “is bor­row­ing more than it can re­pay”.

“The turnover of ex­otic cars has dropped markedly in the past three years. Prof­its are down. An in­ter­ven­tion is needed to avoid to­tal col­lapse of the com­pany,” he said.

Ac­cord­ing to Evens, SMD’s sales of ex­otic cars had dropped from R244m in the year to end Fe­bru­ary 2017, (an av­er­age of R20m a month), to R69m in the eight months to end Oc­to­ber (an av­er­age of R8.6m).

Gross profit dropped from R9m in the 2017 fi­nan­cial year to a loss of R8m in the eight months to end Oc­to­ber.

But SMD’s Shaun Du­miny said the En­gaged re­port ac­tu­ally stated that the core busi­ness was “healthy, well lo­cated and has strong fran­chises”.

The re­port has not been sub­mit­ted by ei­ther party in their court pa­pers and is con­sid­ered con­fi­den­tial at this stage.

In his af­fi­davit, Du­miny said there were dis­putes that could only be re­solved by a full trial “where the bank will be hard pressed to prove its claim”.

He said the ini­tial credit agree­ment, now re­lied on by the bank in its le­gal ac­tion, had ter­mi­nated in Au­gust 2017.

While Absa claims the deal­er­ship owes R434m, the lat­est state­ment from the bank re­flects that SDM owes R111m, and R46m for the floor plan.

The busi­ness had also man­aged to re­pay R107m of debt in the past 12 months. Six deals done in early De­cem­ber, for ve­hi­cles rang­ing in price be­tween R200,000 and R2m, were at risk be­cause the bank was re­fus­ing to al­low the trans­fers, Du­miny said in his af­fi­davit.

He said Evens had also not dis­closed that Chroma Cap­i­tal wanted to pur­chase the busi­ness for R182m, ex­clu­sive of the value of the stock.

“He is aware of this but in­stead is seek­ing to de­stroy the busi­ness. He mocked it as be­ing a front, when it is a pro­fes­sional or­gan­i­sa­tion run by in­vest­ment bankers.”

He says a re­port sub­mit­ted by auc­tion­eer Peter Maskell proved that as­set value which he could re­alise (R6.9m from the sale of un­en­cum­bered stock) is in­com­pa­ra­ble to the value of the of­fer from Chroma.

“It just lacks com­mer­cial logic,” Du­miny said.

/www.smd­group.co.za

Su­per­cars: The show­room of Bal­lito-based SMD Group, which sells Fer­raris, Porsches and Lam­borgh­i­nis.

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