The new Orthotouch business rescue practitioner intends to produce a rescue plan that will offer investors a short-term option to salvage at least a portion of their original investments.
Orthotouch is the rescue vehicle of the former Highveld Syndication (HS) companies, in which around 18 700 mostly elderly people invested R4.6 billion.
More information about this potential option will be made available on Thursday, when Jacques du Toit of Du Toit Business Rescue Practice will chair the first creditors’ meeting after property magnate Nic Georgiou placed Orthotouch into business rescue.
Georgiou also put Zephan into business rescue, which is the underwriter of the Orthotouch scheme. Georgiou stated in his submission to the Companies and Intellectual Property Commission (CIPC) that Orthotouch was indebted to the tune of R5.4 billion and Zephan to the tune of R2.4 billion, and were unable to pay these creditors.
Georgiou, or entities related to him, own both companies.
For the full background regarding the history of the HS companies, read the following articles:
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)
The peculiar case of the Picvest billions: Part 6 (The murky sale of 31 ‘Orthotouch Properties’ to Accelerate)
Jacques du Toit
In an open interview with Moneyweb, Du Toit said he wants to put a concrete offer on the table so investors can make a decision. “I don’t know Nic Georgiou at all. I only met him recently. I told him I am not here to make promises. I will not put a business plan on the table, making promises about future returns. There must be money or shares on the table so investors can take it or leave it. The offer must also be better than what a liquidation would yield.”
Du Toit added that “a third needs to come to the party with either shares or money, which could be offered to investors. I cannot provide more details now, but I am in the process of finalising this. But before I make promises, I want to see concrete facts.
“We need to get closure for these people. I want to get something concrete on the table so these people can make a decision. If the creditors do not think it is enough, I will liquidate the company.”
Du Toit added that all investors are welcome to attend the meeting if their claims against Orthotouch are valid.
Du Toit said his initial investigation shows there are five properties in Zephan and two in the HS companies, and that he has requested valuations for these properties.
A Moneyweb investigation found that the two remaining HS properties are The Bridge Shopping Centre in Cape Town and Absa Witbank in eMalahleni. These properties are relatively small, as The Bridge (HS 16) was initially syndicated for R19 million and Absa Witbank (HS 18) for R15.1 million.
The investigation also found that Orthotouch does not own a single property and is, therefore, not in any position to repay investors without external funding.
A Windeed search confirms Du Toit’s assertion that only five properties remain in Zephan, although it seems as if Georgiou sold several properties during the past year.
Last year Georgiou stated in an affidavit, filed in defence of an unsuccessful liquidation application against Zephan, that Zephan directly or indirectly owned 11 unencumbered properties valued at around R266 million. If Zephan currently owns only five properties, a total of six properties were subsequently sold.
It is therefore clear that Orthotouch and Zephan are hopelessly insolvent as their assets represent a fraction of the multiple billions of debt.
It will therefore be interesting to hear Du Toit’s opinion as to whether a business rescue process will be able to save Zephan and Orthotouch.
If for whatever reason, these companies are put into liquidation, there may be an application to the Master of the Court to institute a Section 417 enquiry about the possible looting of the companies’ assets before the company goes into liquidation.
It is not apparent whether the business rescue process will affect the investors who have accepted the Accelerate share offer facilitated by the Highveld Syndication Investment Forum (HSIF). This offer also seems to remain open to current investors until the end of November.
The salient terms of the offer are that HS investors will receive 25% of their original investments in Accelerate shares at the net asset value of R7.50 an Accelerate share. They will also receive dividends.
However, the Accelerate share price is currently trading at R1.69, which means investors will, in effect, receive less than 6% of their original investment.
Furthermore, several HS investors who accepted the offer as far back as last year, claimed they had not received their Accelerate shares in terms of the offer.
Helgard Hancke, the individual who runs the HSIF, did not respond to a question on why the Accelerate shares were not issued to the investors as alleged.
Hancke, however, stated in a communication sent to investors on Tuesday that investors who accepted the Accelerate offer are no longer HS investors or bound by the Orthotouch scheme. He also stated that “we were informed and assured that the issuing of shares and future dividend payments will not be influenced by the Orthotouch Business Rescue plan.”
Interestingly, the private investigation firm of Mike Bolhuis published a document within days of Orthotouch and Zephan being put into business rescue, in which the firm endorsed the 25% Accelerate offer.
However, Bolhuis’s firm did not highlight that investors will receive less than 6% of their investments, even after Moneyweb pointed this out.
The firm denied that it was paid to publish the document.
The creditors’ meeting will take place at 11:00 at Hotel Apollo, 158 Bram Fischer Drive, Ferndale, Randburg on November 28.