Publications
Partners
Business rescuers left in the dark as front for Eskom and Gupta squashes state-owned mining company’s bid to fund Optimum’s revival
The fate of the Optimum Coal Mine is, again, caught up in a bizarre tale of intrigue after Eskom and an alleged Gupta front company combined forces to scupper a funding plan for the mine.
A massive R1 billion loan from a consortium led by the state-owned African Exploration Mining and Finance Corporation (AEMFC) has been swept from the table and, instead, a new round of bidding to buy Optimum will take place in July.
This funding, which would have seen Optimum restart production and pay workers their wages, owed since last year, will now be reduced to a smaller loan while the bidding process restarts.
Affected parties were informed of this new twist in a circular last week.
It suddenly cast massive aspersions on AEMFC’s ability to even come up with the money.
This is despite the cash injection having been presented earlier as more or less a done deal, and an “opportunity that Optimum can ill afford to miss” by business rescue practitioner Louis Klopper.
The Optimum mine, and the even more valuable coal export allocation that comes with it, is the jewel in the crown of the Gupta family empire that voluntarily entered business rescue in 2016.
Despite that, the business rescue practitioners have apparently been blindsided by Eskom and Bermuda-based Centaur Ventures’ new deal scrapping that finance.
Optimum’s business rescuers accuse Centaur of being a Gupta front and aiding the Gupta family’s businesses in milking money out of Optimum.
In court papers earlier this month, Klopper said that “Centaur, its directors and shareholders have close associations with the Guptas, and seems to have assisted in channelling and laundering money”.
The Gupta connection is that Centaur is half-owned by Akash Garg Jahajgarhia, who married the Gupta brothers’ niece, Vega, at the infamous Sun City wedding in 2013 – an event that thrust the family into the national spotlight.
ENEMIES TO ALLIES
Up to now, Centaur had been challenging Eskom’s massive claim on Optimum, consisting mostly of penalties for poor coal deliveries.
Centaur has argued that its own claim of nearly R1 billion will be diluted if Eskom’s claims stand.
The two are Optimum’s largest creditors and have now apparently buried the hatchet in order to collectively push for a new outcome at Optimum.
Last week, Centaur withdrew its case against Eskom – apparently, after the two creditors struck a deal.
Part of this deal is that they agree to settle their dispute about the size of Eskom’s claim later.
Their combined claims on Optimum comprise more than 75% of all claims, in money terms – in effect, making them able to vote down any rescue plan the business rescuers may come up with, including the AEMFC funding.
Centaur had separately been fighting the AEMFC funding on the same grounds that it challenged Eskom: the funding would dilute its own claim on Optimum.
The same holds true for Eskom, meaning the two creditors have a common interest in new funding for Optimum being kept to a minimum until someone buys it and they get paid their claims from the proceeds.
“Simply put, in order to ensure a successful business rescue ... it will not be practically possible without the support of the major creditors,” the rescuers said in a circular to stakeholders last week.
“In considering what dividends they may receive in such a regime, as opposed to the dividends that they may receive in a liquidation scenario ... if these major creditors find themselves worse off in a PCF [post-commencement financing] regime than in a liquidation scenario, they will not support a PCF regime.
“Without their support, Optimum Coal Mine will inevitably find itself embroiled in costly litigation, which is not conducive to the process of achieving the ultimate objective – rescuing the companies while achieving the best result for all stakeholders involved.”
ABOUT-TURN
After fighting tooth and nail for the AEMFC funding to come through, the Optimum business rescuers last week told affected parties that the deal was, in fact, completely unsound.
In a circular, the rescuers said that after “extensive negotiations” between Eskom and Centaur on the one side, and the business rescuers as well as the AEMFC consortium on the other, “it has become apparent ... that the proposed PCF funding option can no longer be considered to be a viable option”.
Doubts are now being cast on the consortium’s ability to even come up with the promised money.
Other reasons the funding was rejected include that the consortium would get rights “which would place the mine at the mercy of a takeover by the PCF lender, without any value accruing to the creditors”.
Another problem is that Optimum in its entirety would be encumbered as security for the loan from the consortium.
SIDELINED
Approached for comment, AEMFC gave a terse statement, saying it would participate in the looming new bidding process to buy Optimum.
“Centaur and Eskom have come to an agreement and the process has moved into an acquisition phase,” said Kim Polley, a spokesperson for the consortium.
“The consortium will enter a shorter-term PCF agreement and is now also pursuing the acquisition of the asset.”
Asked if it considered the sudden rejection of its funding as having been done in bad faith, AEMFC repeated the same response by email.
The rescue practitioners of Optimum have lashed out at Centaur in their court battle, claiming that the company was part of a Gupta scheme to squeeze money out of the mine to engineer the current claim, while also ensuring that the mine is run into the ground.
The rescue practitioners have, by now, faced about 50 court applications from “the Gupta family and their acolytes”.
There have been other offers to acquire Optimum which have been rejected.
