Risky Oakbay finds R37.5-million just in time
At the end of February, Oakbay Resources and Energy, the JSE-listed Gupta family vehicle, hardly had two cents to rub together. Over the course of a year, the company has lost, on average, R78-million a month.
On February 28, it was left with about R2.7-million in the bank, and its auditors saw fit to raise the issue of its ability to stay afloat.
Yet by the end of last week it had found R37.5-million to make a loan instalment payment to the state-owned Industrial Development Corporation (IDC).
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And if the IDC is concerned about where that money came from – amid allegations that the Guptas have engaged in the blatant laundering of government money – then it is not saying. Asked this week whether it had any concerns about the origins of the money and whether it will investigate the source of the funds, the IDC said only: “The company continues to honour and service its original loan agreement to date.”
The amaBhungane Centre for Investigative Journalism last week published details of how money paid by the Free State government apparently paid for a lavish Gupta family wedding in 2013 through what it dubbed the “Dubai Laundromat”.
Asked whether the IDC felt it needed to scrutinise the source of repaid funds more diligently than other loans, the IDC did not reply.
Oakbay had a June 30 deadline to make a R37.5-million payment to the IDC as part of a loan agreement dating back to 2010, when the IDC provided the Guptas with R250-million for the creation of Shiva Uranium.
Shiva was seemingly set up in anticipation of a need for uranium after South Africa built a fleet of new nuclear power stations, a project that is still on hold.
The loan had been due to be fully repaid in April 2013. Instead it was radically renegotiated in June 2014 with backdated changes that saw the IDC take up shares in Oakbay worth R257-million at a price of R9 each to cover the interest it was owed. Under the same deal the outstanding capital amount was to be repaid in equal instalments, with the next R37.5- million now due at the end of March 2018.
Oakbay has until the end of October 2018 to settle the remaining interest on the loan.
The IDC has consistently insisted that the restructuring of the loan was above-board and to its advantage.
But, when the IDC announces its annual results at the end of July, those numbers will include a paper loss of about R90-million, so far, on that loan originally worth R250-million.
Just before Oakbay was suspended from trade on the JSE at its own request on June 23 (after the resignations of its company sponsor and the chair of its audit committee) its shares, which the IDC received at a special discount of R9 each, fell to R5.80 each.
The IDC this week did not answer questions on its mark-to-market methodology and whether it includes a risk premium for suspended shares, the value of which is notoriously hard to determine.
But in a statement in response to detailed Mail & Guardian questions, the IDC suggested that Oakbay would be delisted, something Oakbay has not disclosed to its shareholders. “The IDC and Oakbay Resources will continue to engage as the process unfolds with a view to ensuring that the IDC is not prejudiced,” it said. “The IDC’s expectation is that the process of delisting will be carried out in accordance with the law and with due regard to the rights of all minority shareholders (including the IDC).”
Oakbay did not respond to questions.
Disclosure: the writer has 10 shares in Oakbay Resources and Energy, with a last-traded market value of R58 at the time of publication