Investors are desperate

HIGHVELD SYNDICATION: AS RESCUE VEHICLE HALTS INTEREST PAYMENTS

Payments to supporters of legal action against Zephan and Orthotouch were unilaterally terminated. Moneyweb

Orthotouch – the failed Highveld Syndication companies’ rescue vehicle has allegedly not paid interest for several months to potentially thousands of investors who haven’t distanced themselves from Zephan and Orthotouch’s legal challenges.

This is despite the submission of a formal application for a court order to compel Orthotouch and Zephan, a company owned by property mogul Nic Georgiou and underwriter of the scheme, to pay the interest due to investors in terms of the court-sanctioned section 155 Scheme of Arrangement.

Derek Cohen, receiver of the Orthotouch scheme, resigned in July, although it must still be court sanctioned. Previously, he said he had no alternative but to turn to the courts after Zephan didn’t pay interest to about 4 500 investors in July, contravening the scheme’s conditions.

Approximately 11 000 investors are entitled to monthly interest payments. Over the past few days, Moneyweb received over 100 e-mails and messages from desperate Orthotouch investors complaining about the non-payment of interest.

No payment

Almost all the investors claimed they hadn’t received their monthly interest payments since July. Several e-mails described how destitute some investors have become since the interest payments stopped. One claimed she had to sell her house, her last remaining asset, to survive.

The non-payment of interest started in June when interest payments to supporters of the legal actions from advocate Louis Bolt and the Highveld Syndication Action Group (HSAG) were unilaterally terminated. It was deemed unfair to investors who did not support the legal challenges to continue interest payments to investors who do.

The HSAG is seeking certification for a class action and the rescission of the scheme, while Bolt applied for Zephan’s liquidation.

This liquidation application follows several default judgments, which compelled Zephan to repay the capital and interest to individual investors in terms of their original Highveld Syndication investment contracts. Zephan and Orthotouch contend the legal costs to contest these challenges, and Zephan’s possible liquidation, may cause the whole scheme to collapse.

Non-payment of interest

Zephan terminated interest payments in June when it informed investors that they needed to complete a form to indicate whether they supported any of these legal challenges or not. It said supporters would no longer receive interest payments. Interest payments to investors who didn’t complete the form were also withheld. Interest payments were later made for June, but Moneyweb isn’t aware of payments for July, August, September or October.

Response

Moneyweb sent questions to Georgiou and his lawyer Mario Kyriacou, but no response was forthcoming.

Jacques Theron of Theron and Partners, HSAG’s legal representative, said the Zephan liquidation application makes it “very probable some HS investors are not being paid due to the Zephan’s financial difficulties. If it is liquidated, a complete seizure of payments can be expected.

“If Orthotouch does not honour the Scheme of Arrangement, other possibilities, such as the liquidation of Orthotouch, will be considered by the HSAG.”