Habib bidders ‘failed to file funding proof’

Court papers reveal registrar’s Vardospan requests.........

Hamza Farooqui, who brought a failed court bid to compel the Reserve Bank to make a decision on his buyout of Habib Overseas Bank, had not provided audited proof of the source of the funds he would use to acquire and fund the bank, court papers show.

Farooqui instituted the urgent court application last Monday on behalf of Vardospan, five days after the Bank’s office of the registrar of banks asked him to provide audited confirmation that he had the means to buy the bank for R327m.

Farooqui said he instituted the application because of pressure from the bank’s seller, Pitcairns Finance SA, to reach a resolution on the deal.

Farooqui is a 100% shareholder of Pearl Capital, which jointly launched a bid for Habib with Gupta associate Salim Essa’s Cinq Holdings through Vardospan. Vardospan applied for permission to buy the Habib shares in September 2016.
Correspondence between Vardospan and the Bank, attached to bank registrar Kuben Naidoo’s court papers, showed his office asked on three separate occasions for proof of funding for the R327m buyout, as well as additional post-acquisition capital of R150m.

 

 

In a letter dated December 14 2016, the registrar asked Vardospan to "elaborate on the sources of funding to be utilised to finance the proposed expansion strategy", and "details of the nature and availability of capital to fund the proposed acquisition of shares in Habib and to support the business following the proposed acquisition...."
Vardospan replied, saying its shareholders "are committed to providing adequate capital to fund [Habib’s] expansion plans".

In another letter dated February 22 2017, the office of the registrar again asked for confirmation of the nature, source and availability of funds for the acquisition, this time specifying the amounts for the buyout and the capital investment.
On March 14, Cinq provided a report from audit firm Nkonki showing proof of funds. However, the report appeared to reference income from Essa’s directorships in Tegeta Exploration & Resources, Trillian Capital Partners and VR Laser without audited statements for each of these companies.

The registrar raised issue with this on March 22, as well as with Pearl Capital’s failure to provide proof of funding.
In reply, Farooqui said Pearl Capital was a minority shareholder and that the relationship between Pearl and Cinq had been "explained" to the registrar.
The Bank had requested complete financial statements of the two entities on the day he had filed court papers, he said.
"We provided all the information we were asked to provide when we were asked to provide it," he said.
Naidoo told the court Vardospan’s application could not be processed because of the failure to produce proof of funds. Completed forms for a change of directors on Habib’s board post-acquisition were also delayed.

Naidoo also said Vardospan declined to produce revised financial projections, which the Bank thought were not feasible because of SA’s weak economy.
Vardospan had forecast 39.8% growth in loans and advances and a 243% surge in net profits during the 2018 year.
However, Farooqui felt it should not have taken the registrar seven months to process Vardospan’s acquisition.
He said this was not a banking licence application, which typically took longer, but an acquisition of a small, existing bank.

He also felt "grossly victimised" by events of the past week and remained committed to creating a 100% black-owned challenger bank.

 @Businessdaylive