British-multinational lender Standard Chartered (StanChart) and African Banking Corporation (ABC) are running out of legal options in bid to avoid paying an SA investor nearly R1bn over the collapse of then JSE-listed Blue Financial Services in 2013.
This is after the high court in Johannesburg last week refused the banks leave to appeal against its earlier decision that the two lenders colluded to breach a debt-restructuring agreement that sank Blue Financial Services more than a decade ago.
The court ordered the lenders to pay an entity called Mapula Solutions R704m plus interest calculated from 2016 for breaching the recapitalisation agreements intended to save the now defunct microfinance institution.
Mayibuye Group, which specialised in turning around distressed businesses, invested in Blue Financial Services before ceding its rights to Mapula.
Blue Financial Services, which had operations in SA, Botswana, Zambia, Uganda, Tanzania, Malawi, Mauritius and Nigeria, was at one stage valued at about R3.7bn on the JSE. However, it incurred a record loss of R1bn in 2010, rendering it insolvent and the company’s market value plummeted to R56m.
In stepped Mayibuye which invested R163m in the business and proceeded to separate Blue Financial Services’ insolvent and underperforming business from what was planned to become a new, restructured and recapitalised business — referred to as Good Bank.
Mapula owns the Mayibuye, which was Blue’s controlling shareholder. Mapula directors include former Blue CEO Johan Meiring.
StanChart and ABC were involved in the recapitalisation that would see Mayibuye buying shares worth R163m in Good Bank, and creditors including StanChart and ABC converting as much as R1.2bn of debt into equity.
However, the agreement encountered problems in late 2013 when StanChart and ABC called in their loans.
Judge Margaret Victor found last year that ABC and StanChart breached the debt-restructuring agreement, and that led to losses for Mayibuye.
Mapula’s argument was that financial benefit of R704m would have flowed from Maibuye’s investment had StanChart and ABC not breached the terms of the debt-restructuring agreement.
Victor on Friday dismissed StanChart and ABC’s leave to appeal against her September decision.
“A further basis for granting leave means that there must be compelling reasons to grant leave to appeal. The assertion by the defendants that there are conflicting judgments on the question of a reflective loss is without merit. The facts found to be proven in this case are that Mayibuye’s investment was lost,” reads the judgment.
“This court has found that the orchestrated conduct of all the defendants, based on facts that could not be disputed, amounted to a breach of the debt-restructuring agreement ... the minutes of the lender committee are manifestly evidence of the orchestrated breaches by the defendants. Another court would not come to a different conclusion on the undisputed facts.”
One of the instances of collusion Judge Victory found led to the loss of Mayibuye’s investment was that ABC Zambia in November 2013 wrote to Blue demanding the company pay it $3.9m. A few days later it sent another letter of demand, and a further letter was sent by ABC to Blue demanding $4.3m.
ABC Botswana followed suit, demanding 42.8-million pula (R59.8m), and said the entire loan it had advanced to Blue had become due. StanChart embarked on a similar course in November 2013, demanding R151m from Blue within five days
StanChart and ABC have an option to petition the Supreme Court of Appeal for leave to appeal against the high court’s decision.
Victor relied on expert testimony that extrapolated what Mayibuye’s initial R163m investment would have been worth on June 26 2013, when trading in Blue Financial Services shares was suspended on the JSE.
Based on the share price on the day before trading was halted — 13c a share — the witness calculated that Mayibuye’s stake was worth R577m.
StanChart, which is listed on the Botswana Stock Exchange, is withdrawing from several sub-Saharan African markets, a move it said was part of plans to reduce costs by more than £802m by 2024.
In July last year, the London-based lender said it would sell its stake in subsidiaries in Angola, Cameroon, Gambia and Sierra Leone, as well as its consumer, private and business bank in Tanzania to Nigerian-based Access Bank. It also exited Zimbabwe last year.
Besides the assets from StanChart, Access Bank has also bought ABC Zambia after receiving approval from the Zambian authorities a year ago.
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