Mercantile Bank sale unaffected
CONSPIRACY ALLEGATIONS: BANK TO RIGOROUSLY DEFEND CLAIMS
Alert Steel and ArcelorMittal South Africa allege that a shareholder, company directors and Mercantile Bank, conspired to put the company in liquidation.
The sale of SA-based Mercantile Bank by Portugal’s Caixa Geral de Depósitos is unlikely to be affected by conspiracy allegations against it by creditors of now-defunct Alert Steel.
The bank – which called on a loan granted to Alert Steel – refutes the allegations, saying its actions were permitted in terms of the loan agreement and the law, and necessary to protect its own interests.
Mercantile Bank CEO Karl Kumbier says: “What is the incentive for a bank to collude with someone to bring down a business? It is absolute rubbish! Why would we lend the company money with a view to bring it down?”
He believes the matter will have no bearing on the bank’s sale besides influencing any potential deal’s structure.
The plaintiffs, Alert Steel and credit provider ArcelorMittal South Africa, want a perfection agreement between Alert and Mercantile Bank set aside; they’re also seeking R251 million from Rayhaan Hassim (Alert Steel shareholder) and the bank, and a further R100 million from the bank. They allege in May 2014 Hassim, with company directors and Mercantile Bank, conspired to devise and implement a scheme to transfer the company’s business and assets to a new company held by Hassim, to pay Alert Steel’s loan liability to Mercantile Bank [at the expense of Alert’s other creditors], and put the company in liquidation.
Alert Steel was liquidated in July 2014. The transactions influencing the matter date back to 2013, when Alert Steel was restructured and required support.
According to court papers, Mercantile Bank extended a R104 million loan to Alert Steel in March 2014. The papers state Hassim caused Alert to enter into the agreement to pay off a loan, previously granted by a firm in which he was sole shareholder.
The papers allege after Hassim’s other companies withdrew support for Alert Steel, Mercantile Bank “unlawfully purported to cancel their loan agreement” (R104 million).
Kumbier disputes this, saying the bank had a proper, legal loan agreement with Alert. He said it called on its loan when the business no longer appeared to be viable, following the departure of key executives, and shareholders were no longer able to support the business, which constituted a breach of the loan agreement.
He added Alert Steel went into business rescue for two months and he’d personally participated in meetings with its creditors and with listed companies then interested in buying the company.
In July 2014, the court granted a provisional liquidation order for Alert Steel, following an urgent application by CGIC. It’s alleged Hassim’s shelf company West Lake offered to purchase the company’s assets for R100 million.
The plaintiffs allege one of Alert Steel’s provisional liquidators Chris de Wet undervalued the company’s assets and made “material misrepresentations” to the master of the court in his application to have the forced sale approved.