Standard Bank has agreed to open accounts for all eight of the Gupta family’s companies that entered business rescue last month – finally ending a two-year boycott of the family’s business interest by almost the entire formal banking system in South Africa.
At the same the business rescue practitioners were already gearing up for a fight with Eskom over a R105 million fine it slapped on the Optimum coal mine last month for under-delivery – the reason the Guptas’s companies had a cash crunch in the first place.
The business rescue practitioners announced the banking news on Monday at the first series of creditors’ meetings being held in Kempton Park.
Standard Bank held a board meeting where the issue was discussed on Friday and the bank informed the business rescue practitioners on Sunday, said Kurt Knoop, one of the rescuers.
Another local investment bank had been willing to take on the business now that the Guptas were no longer in control of the businesses, he told City Press.
Standard Bank would immediately take over the companies’ deposits from the Bank of Baroda, which has been trying desperately to rid itself of the Gupta family’s business – to the extent that it was trying to leave the country. This would not include all the Gupta companies that had accounts at Baroda, but would certainly cover most of the deposits kept there.
The business moving to Standard Bank included the rehabilitation funds for the Optimum and Koornfontein coal mines, representing R1.5 billion in cash.
A spokesperson for the bank said he could not confirm the news due to client confidentiality.
The Gupta family’s empire was first snubbed by the banking establishment in December 2015 when Absa closed their accounts. Standard Bank, Nedbank and FirstRand followed suit in 2016.
On Monday, meetings were held for the creditors of Tegeta Exploration, VR Laser and Optimum Coal Terminal – a company holding the Optimum coal mine’s export allocation at the Richards bay Export Terminal. Meetings were also held for creditors of the Guptas’ two investment companies Islandsite 180 and Confident Concepts.
Creditors were told that the plan was to ultimately unbundle and sell the group’s assets. This meant that the Guptas would not regain control and the banking boycott should not be a problem in future.
The meetings were sparsely attended, with the Bank of India and Bank of Baroda both sending representatives to the Islandsite and Confident Concept meetings to register their claims and demand answers.
It was revealed that Confident Concept owed the Bank of Baroda R60 million and the Bank of India R7 million. Islandsite also owes Bank of India R31.5 million. The companies owned properties and Confident also owned the mining vehicles that were being used by the Guptas’ mines – on a rental basis.
A business rescue plan had to be drawn up in the next three weeks for creditors to vote on. Eskom was certain to be a major part of that plan.
The business rescuers wanted to suspend parts of the Optimum coal mine’s contract with Eskom, said their attorney Rikesh Sewgoolam. Specifically, they wanted to suspend the penalty provision and make Eskom pay within 15 days rather than the 30 days currently agreed on.
Failing that, business rescuers had the ability to simply suspend the whole contract, he said.
Alongside the Koornfontein mine, Optimum was the most valuable part of the Gupta business empire.
READ: Inside the Gupta heist
Optimum was fined R105 million for delivering less coal than contracted in January. While Eskom had previously said the mine only delivered 118 000 tons, Knoop said that it was actually 275 000 out of the contracted 375 000 tons in a month.
Since the payment due was only R52 million, Eskom had simply not paid the mine, he told City Press.
“We want to meet Eskom about price,” said Sewgoolam.
“Either they come to the party and suspend parts of the agreement, or we suspend it all or even go to court to cancel it,” he said.
Optimum infamously received only R200 a ton from Eskom while its breakeven point was R250. The rescuers wanted to get a price closer to the average R400 that Eskom paid its suppliers.
In addition to that, they hoped to save the company with an injection of cash from export sales.
The rescuers were close to finalising a prepaid export deal for R100 million a month, they told creditors. Optimum received R900 a ton with export sales.