Alec Hogg
The collapse of Regal Bank was confirmed on Wednesday morning when Deloitte & Touche’s Tim Store became the new man in charge at the group’s plush Sandton offices. Store, a banking specialist who has had the job four times before, has been appointed by the minister of finance as the bank’s curator.
Regal’s crash, precipitated by Monday’s announcement that the board of directors had accepted founder Jeff Levenstein’s offer to step down from all senior positions at the group, has been as spectacular as it has been rapid.
Store was also called in to tend to undertaking duties at the last major retail bank to suffer from ”liquidity” problems, since FBC Fidelity. A curator is appointed by the government in terms of the Banks Act and in Store’s own words, his role is ”to take control of a bank which is having liquidity problems. He has the power to freeze deposits and then he looks for a solution which will restore the bank to good operating conditions.” It means clients no longer have access to their deposits, which according to the financial statements totalled R1,1-billion at the end of February.
Neither Regal chairperson Derek Cohen nor Store could be reached for comment at the time of writing this story: both were involved in a board meeting at Regal’s imposing Stone Manor headquarters in Sandton. They are presumably trying to work on landing the best possible result, which would be a speedy sale of the group as a going concern. That is the only way depositors will be assured of rapid access to their cash.
If a buyer cannot be found, Regal’s clients could be in for a long wait before being able to get hold of the bulk of their funds. In FBC’s instance, depositors were able to withdraw only R10 000 each after the curatorship was announced in October 1999. It was 18 months before they could get their hands on the rest of their money, although some good news was that interest continued to accrue during the frozen period.
For Regal’s estimated 1 600 private shareholders (no institutions have any significant exposure to the stock) there is no silver lining in today’s news. In situations like this, shareholders rank a long way down the list of creditors. In FBC’s case the share certificates are worthless today.
The curatorship comes after what should have been a day of celebration for Levenstein, who turned 50 on June 27 the day his bank went into curatorship. That he had no idea of the clouds that must have been gathering is illustrated in a glowing tribute to his entrepreneurial prowess which appeared in the Beeld newspaper six weeks ago.
In the profile article acknowledging his selection as ”businessman of the week” Levenstein claimed the Regal share price (then 465c) was half what it should be, calling his company ”the Investec of the new millennium”. He then cheekily took a swipe at Investec, whose head office overlooks a substantial Regal property development. Said Levenstein: ”I understand Stephen Koseff, CEO of Investec, is unhappy that this choice piece of real estate is being developed in front of his nose.” The article still has pride of place on the front page of Regal’s Internet site www.regal.co.za.
Ironically it is the very same Investec that provided yesterday’s lifeline when stepping in to buy R300-million worth of loans off the embattled operation. That gave Regal the cash to meet the initial demand from spooked depositors. Unfortunately, it was never going to be enough after news surfaced that Regal’s structure had been built on weak foundations specifically, ”structured products” devised by Mettle that apparently used the bank’s own funds to support its share price.
Given Investec’s past record of moving fast to pick up distressed banks cheaply, a repeat by this group is the best hope Regal’s staff and depositors have of reducing the trauma that invariably accompanies such banking collapses.
ENDS