A close reading of the Public Investment Corporation’s (PIC) statement responding to Iqbal Survé’s demand for an immediate (within 24 hours) retraction of its public statement about considering the liquidation of Sekunjalo does indicate a bit of a climb down. But only a little, given the proliferation of the Sekunjalo name in the Independent Media saga.
The threat of liquidation was made in response to questioning during a parliamentary hearing. The MPs wanted to know what the PIC was planning to do about the return of a R1.27bn investment in Sekunjalo, which got control of Independent Media in 2013. Not an unreasonable query given the lack of any public disclosure about the funding of a rather politically sensitive asset.
The problem is, as Survé quickly pointed out, the PIC money didn’t go to Sekunjalo (Investment Holdings) but to Sekunjalo Independent Media (SIM), which is a completely separate legal entity. Some of it also went directly to Independent Media.
The PIC apparently said it would consider liquidation of Sekunjalo as part of its efforts to secure the return of its money. While the indiscriminate use of the word Sekunjalo may have been useful to Survé in the past, giving the impression he was substantially the largest shareholder in Independent Media, this use of it did not suit him at all.
In its response to Survé’s demand for a retraction, the PIC did not address the “Sekunjalo” liquidation threat and dealt only with its plans to get back some of the R4.23bn it had poured into another Sekunjalo venture — Ayo. It remains unclear how vigorously the PIC intends pursuing its claims against SIM and what the implications would be for the Independent Group, which is 55% held by SIM.
The planned Sagarmatha listing would have delayed the day of reckoning, allowing the PIC to exchange its investment in unlisted SIM/Independent Media for shares in Sagarmatha.
With any luck there will now be a court case that will provide some clarity.
Not every day that a R1bn loan is written off
There are not many companies on the JSE — or any other bourse for that matter — fortunate enough to have a huge loan written off by a key funder.
In October, Namibian investment company Trustco announced it was no longer burdened with the payback or servicing of interest of a R1bn loan made to it recently by founder, CEO and majority shareholder Quinton van Rooyen.
It was only recently that Van Rooyen was placing a portion of his shares on the open market to raise funds to make the loan to Trustco.
One way of looking at this bizarre development is to argue that Van Rooyen is so confident that Trustco — and especially its soon-to-be-listed resources arm — will make such stunning returns that a R1bn write off is a small sacrifice for longer-term gains.
Van Rooyen is certainly not going to be short of Trustco scrip, remembering he is owed a sizeable paper settlement of R3.6bn for vendoring in his own diamond exploration assets into the group.
What’s more, Van Rooyen’s magnanimous write-off will provide a huge, but artificial boost, to Trustco’s profits — and especially the fledgling resource segment where the loan funding was utilised.
A more pertinent question, of course, is whether Trustco, whose profits have worryingly not yielded commensurate cash flows in recent years, was really in a position to repay and service such a large loan.
In this regard two upcoming matters are of critical importance: a marked improvement in Trustco’s cash conversion rate in its next set of results; and just how much fresh capital is raised from outside by the resource segment’s initial public offering.
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