Just days before property magnate Nic Georgiou and the Highveld Syndication Action Group (HSAG) were set to square off in the North Gauteng High Court, it emerged that Georgiou put Orthotouch and Zephan into business rescue.
Georgiou, the owner and only director of the companies, filed documentation with the Companies and Intellectual Property Commission (CIPC) last week, stating that both companies are “financially distressed”, without providing any significant details about its financial problems.
He did, however, reveal that Orthotouch and Zephan are indebted to the tune of R5.4 billion and R2.4 billion respectively.
However, Windeed reports suggest that these companies own hardly any property assets.
It does not seem that Georgiou, Orthotouch or Hans Klopper, the business rescue practitioner of the HS companies, have informed investors that Orthotouch has been put in business rescue.
The peculiar case of the Picvest billions (Part 1) (Background)
The peculiar case of the Picvest billions (Part 2) (Background)
The peculiar case of the Picvest billions (Part 3) (Overvaluation of properties)
The peculiar case of the Picvest billions (Part 4) (Property transactions prior to HS companies being put into business rescue)
The peculiar case of the Picvest billions (Part 5) (Disposal of properties contradicts the intent of the business rescue plan)
Orthotouch and Zephan
The financial problems at Orthotouch are extremely concerning, as the company was set up by a Section 155 scheme of arrangement as the rescue vehicle for the failed HS companies. Orthotouch was hailed as the only hope for the 18 700 investors to recover the R4.6 billion they invested in the schemes.
This scheme was never implemented, as not one of the 79 former HS properties was transferred to Orthotouch. They were all sold to third parties. The extent of Orthotouch’s financial problems was also never disclosed to investors, as its financial statements were never made public.
The other company Georgiou put into business rescue is Zephan. It used to house Georgiou’s extensive property portfolio, and was also the underwriter of the scheme of arrangement. A Windeed report shows that while Zephan once owned more than 150 properties, there has been a significant sell-off and only five remain on its books today.
Georgiou says in his submission to CIPC that the Orthotouch board decided to put the company into business rescue on November 7.
“As director I investigated the Company’s affairs and concluded that the Company is ‘financially distressed’ as defined in section 128 of the Act as it is reasonably unlikely to be able to pay all its debts as they become due and payable within the immediately ensuing six months and/or the Company is reasonably likely to become insolvent within the immediately ensuing six months.
“According to records provided to me and to the best of my belief, the Company is indebted to its creditors in an amount of R5.4 billion. It is difficult to confine to an amount in light of various claims which have been made by various parties. In various litigious matter proceeded with against the Company. This number is therefore subject to substantial verification and adjustments.”
Georgiou did not provide any information regarding the identity of the various creditors.
Georgiou added that “the Company requires time in order to restructure its affairs, debt and equity so that the creditors of the Company are afforded maximum benefit”.
“Funding from sources such as shareholder loans [entities linked to Georgiou himself] and loans [from] the Company’s financiers has ceased or is about to cease. The Company is faced with the situation where it needs to realise its assets or to procure further funding to best effect and to negotiate with its creditors which process will be best achieved under business rescue proceedings as envisaged in terms of the Act.”
Georgiou did not disclose which assets remain in the company. However, a Windeed report shows Orthotouch does not currently own a single property, while a previous Moneyweb investigation revealed that Orthotouch has never taken ownership of any property.
It is not clear what other assets Orthotouch owns to set off against the claimed R5.4 billion of debt.
The affidavit related to Zephan is ostensibly identical to the one related to Orthotouch, although Georgiou claims that Zephan owes creditors R2.4 billion.
Jacques Theron of Theron and Partners Attorneys said in response to questions that these developments are “just another attempt to prolong the proceedings”.
“It is not only an abuse of the court process but also of the administration of justice and corporate governance. It is just a further but transparent and desperate attempt by Georgiou to avoid the inevitable certification of a class action, but the HSAG is ready for him and others who benefitted unlawfully from the failed HS companies.”
Theron said these developments should not have any material impact on the class action certification process that started in the Pretoria High Court on Monday.
Moneyweb sent questions to Georgiou and his attorney of record via WhatsApp and email requesting more information, but we did not receive a response before publication.
Moneyweb also asked Klopper, who is also a former director of Orthotouch, for comment, but he did not respond either.