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The Industrial Development Corporation (IDC) has become the latest in a long line of litigants against the business rescuers of Evraz Highveld Steel and Vanadium.
In an urgent application to the North Gauteng High Court this week, the IDC asked the court to “perfect” its R150 million claim against the stricken steel group.
This is despite the IDC already ranking higher than any other creditor, apart from the retrenched workforce.
Spokesperson Mandla Mpangase told City Press that they had no intention of trying to get paid before the workers did.
The real concern is that the IDC would lose its ranking if Highveld’s last-ditch business rescue plan fails and the company goes into normal liquidation.
It also wants to be formally given oversight over the asset sales by the business rescuers.
In court papers, the IDC claimed that the R150 million it lent Highveld is “imperilled” and that the business rescuers are trying to turn it into a concurrent creditor, which would mean losing most of its money.
The IDC gave Highveld a R150 million bond to tide it over after it went into business rescue.
According to Highveld’s business rescue practitioner, Piers Marsden, the IDC really doesn’t stand to gain anything through its court case.
“In my opinion, it doesn’t change the waterfall,” he told City Press this week.
That is true even if the company ends up in liquidation, he said.
The “waterfall” is the order in which creditors get paid as Highveld’s assets get sold over the next few years.
After the original rescue plan failed earlier this year, Marsden will now sell choice units of Highveld intact and sell the rest of the assets as scrap or second-hand equipment.
Marsden believes he can in this way raise R1.1 billion to pay creditors.
Of that, a total of R443 million is expected to be eaten up by “holding costs” – paying the bills until the business rescue is complete.
Of the R718 million that hopefully remains, employees get R328 million as retrenchment packages and salaries that are owing.
They get preference before other creditors.
Then the IDC gets its R150 million, and only then do the other creditors share what is left.
Creditors claiming more than R2 billion will in effect share R200 million.
According to Marsden, there is no scenario in which the IDC can secure its claim any more than it is already secured.
There is also no way the IDC could put its claim before that of the workers.
He, however, adds that this is his “opinion”.
While the IDC apparently wanted more “insight” into the process of selling Highveld’s assets, there was no way it would get control of it, Marsden said.
The major unknown is the SA Revenue Service (Sars), which has slapped the company with a tax claim of R689 million related to the use of a fake manufacturing subsidiary in Austria to funnel money out of the country untaxed between 2007 and 2009.
Marsden and fellow business rescuer Daniel Terblanche were in talks with Sars about the claim, which has followed on the heels of a nearly identical one for the years 2010 to 2012, which is already in tax court.
The rescue process has been wracked by conflicts. When Highveld went into business rescue in April last year, the rescue practitioners immediately clashed with financier Sasfin.
They accused Sasfin of undermining the rescue by claiming penalties and holding up the R150 million cash injection from the IDC while trying to “opportunistically” buy out Russian owner Evraz’s 85% stake for R1.
There was an undisclosed settlement with Sasfin this year after a case to reclaim the R35 million penalty.
Then Evraz tried to stop the business rescue plan, which entailed selling the company as a whole to a Chinese investor.
Evraz was outvoted by Sars, which only lodged its enormous tax claim and became a creditor on the day of a creditors’ vote for or against the plan.
Evraz is now in court trying to invalidate the Sars claim.
The sale to the Chinese investor fell through anyway, making the case moot, according to Marsden.
The deal largely failed due to a huge environmental liability owed to the government that could not be resolved with the department of environmental affairs.
Now that the “dirtier” parts of Highveld were almost certain to be closed for good, that liability had been massively reduced, Marsden said.
The liability was actuarial in nature, based on future damage, he said.
