Absa Bank has applied for the liquidation of former Steinhoff CEO Markus Jooste’s Mayfair Speculators, the company that, until this week owned South Africa’s best racehorse, Legal Eagle, as well as hundreds of other racehorses, a property portfolio and a chunk of Steinhoff shares.
Absa has also demanded an investigation into a suspicious transaction that saw Mayfair move R1.5 billion of assets to its holding company in August this year. This was just months before significant financial irregularities hit the headlines, causing one of the largest ever corporate implosions in South Africa.
The bank says it is “highly probable” that Jooste was aware of the imminent uncovering of the financial irregularities, which he later took responsibility for. This could have prompted the transaction.
The German magazine Manager-Magazin reported on 25 August that Jooste and other senior Steinhoff employees were being investigated by German authorities for possible accounting fraud. Steinhoff strongly denied these allegations.
Steinhoff’s share price continued its decline on Thursday. At 11:38 the price was R3.99 a share, down 14% from Wednesday’s close.
The liquidation hearing is due to be held on Friday, and Mayfair has not yet filed responding papers. Moneyweb was unable to get hold of Jooste and Mayfair’s legal team did not answer its office number.
Mayfair Speculators is a wholly-owned subsidiary of Mayfair Holdings. The only active director is Stefan Potgieter, Jooste’s son-in-law. Jooste resigned as a director on December 7 this year.
Potgieter did not want to speak to Moneyweb on Wednesday, saying he was very busy before terminating the call.
Mayfair Speculators houses many of Jooste’s assets, including Steinhoff shares (held via SBG Securities), many properties, racehorses and a 49% share in Klawervlei Stud, a horse-breeding farm. Racing is Jooste’s passion and he was a regular feature at racing sales. In September, Mayfield (in various partnerships) acquired nine yearlings at the annual yearling sale in county Kildare, Ireland for a collective €2.3 million.
Until recently Jooste was a director of Cape Thoroughbred Sales (CTS), a position he has recently vacated. Mayfair Speculators is in the process of exiting its shareholding in CTS.
In an affidavit, Absa manager Hester van Niekerk (unrelated to the author), states that Absa provided a R350 million overdraft facility and bank guarantees to Mayfair Speculators in December 2016.
This was secured with 11.2 million Steinhoff shares held by SBG. At the time Steinhoff’s share price was R71 and the shares were worth R800 million. Van Niekerk also states that an additional 3.2 million Steinhoff shares were transferred to SBG on August 18 this year to increase the total holding to just under 15 million shares, valued at around R936 million at the time.
Share price implosion
Van Niekerk stated that Steinhoff’s spectacular share price implosion early in December slashed the value of the shares to only R145 million, which resulted in a breach of the share cover covenants.
Van Niekerk states that an Absa representative informed Potgieter on December 6 that Mayfair was in breach and requested the company to put up additional collateral. Potgieter allegedly stated that Mayfair did not have additional collateral to remedy the covenant breaches.
A few days later, Absa demanded the repayment of R226 million.
During a subsequent meeting, Potgieter acknowledged to Absa that Mayfair was technically and commercially insolvent as it had liabilities of around R1 billion and assets of about R350 million.
At this meeting, Van Niekerk alleges, Potgieter also stated that in August this year, Mayfair transferred assets to the value of R1.5 billion to its parent company, Mayfair Holdings, as a dividend in specie. This dividend included several properties, development properties, Lodestone Brands and a company that manufactures pipes.
He also confirmed that Mayfair and other subsidiaries are selling racehorses.
In the affidavit, Van Niekerk says Mayfair disposed of R1.5 billion of assets while Jooste was a director of the company. “It seems highly probable that Jooste was aware that the financial irregularities and fraudulent transactions (at Steinhoff) would be uncovered in the near future, which explains the declaration of a dividend in specie in the sum of approximately R1.5 billion.
“It is imperative that a provisional order of winding-up be granted as a matter of urgency so that the provisional liquidator can commence an investigation and an enquiry can be held in order to determine the lawfulness of the declaration of the dividend of about R1.5 billion and any other transactions within the Respondent and its associated companies.
“It seems probable that the Respondent (through Jooste) has disposed of other assets which require immediate investigation and resolution.”
Moneyweb has also learned that Jooste and companies related to him are selling several properties in Hermanus, Stellenbosch and Val de Vie near Paarl.