The man who wanted to buy the Gupta-owned Optimum Coal Mine (OCM), CEO of acquirer Liberty Coal Daniel McGowan, has offered to buy out the creditors pending the mine’s legal battle with the National Prosecuting Authority (NPA).
McGowan said on Thursday that Liberty Coal has made an offer to purchase total monetary claims against OCM from each creditor excluding related party OCM creditors and those creditors whose claims are contingent or disputed.
This after the Pretoria High Court thwarted the sale of OCM and handed a preservation order of the mine to the NPA in March. R3.4-billion worth of assets of the mine were frozen.
McGowan said: “The open offer by Liberty Energy [the owner of Liberty Coal] is intended to put creditors in a position whereby they have a mechanism to realise money now whilst there are delays with the implementation of the business rescue plan due to ongoing litigation, therefore to the advantage of the creditors.”
One of OCM’s largest creditors is embattled power utility Eskom. Eskom voted in favour of OCM’s business rescue plan which envisaged Liberty Coal acquiring OCM’s business and assets in 2020.
It accepted a settlement of 20c in the rand payable over five years, with payments due to commence one year from the implementation of the business rescue plan.
Eskom’s recognised creditor claims stem from contractual penalties that were initially disputed by OCM, but eventually settled via arbitration, which resulted in a settlement agreement.
According to McGowan, all OCM creditors have the option of an outright purchase equal to 20% of the total of its claim/s, which will be payable in cash within 10 business days.
He said the offer would be advantageous to Eskom and other creditors, noting that Liberty believed the offer would be accepted by OCM creditors who “have waited patiently for over four years for OCMs business rescue to realise a return to creditors”.
“The main advantage to all creditors is that we will commence payments immediately on a monthly basis over a fixed period of time, or alternatively make payment in full for 20 cents in the rand, whereas in terms of the business rescue plan, all creditors would receive an annual amount towards the value of their compromised claim subject to Liberty having made sufficient profit to pay such amounts.
“The main advantage to Eskom is that the compromised value of their creditor claim of circa R255-million, which was due to be paid over five years, will be payable now in full. Simply put, Eskom will be paid the amount to which it has agreed, but with payment made in full with the obvious cash flow advantage,” he said.
McGowan added: “We have therefore been understandably disappointed that, notwithstanding Eskom’s formal support for Liberty’s proposed business rescue of OCM, it has now seemingly changed its stance and unofficially chosen to support the National Prosecuting Authority’s [NPA] application for a preservation order of Optimum’s business and to rather potentially seek its forfeiture to the state.
“This application has been firmly opposed by most other parties affected, such as the National Union of Mineworkers and an additional 134 individual creditors of Optimum.”
He said the unanimous support recognised that any delays in the implementation of the OCM business rescue plan serve only to defer employment opportunities and to deprive local communities of the “much-needed sustenance”.
McGowan assured that the offer would financially benefit former employees of OCM and its creditors “in circumstances whereby Liberty Coal is taking on the additional commercial and legal risks of further challenges from the NPA”.
He said further that without this offer, Eskom and the other creditors would suffer potential delays in payment of the amounts due to them in terms of the approved business rescue plan with the risk of forfeiting their due claims.
“We remain committed to a successful rescue of Optimum Coal Mine, whether in terms of the adopted OCM rescue plan or any new business rescue plan that may be proposed and is acceptable to its creditors in the future.
“However, we are acutely aware of the ongoing hardship and distress caused to many of Optimum’s creditors, local business, and community stakeholders as a result of this latest derailment of the mine’s business rescue process.”
Details of the sale of OCM were highlighted in the fourth instalment of the Zondo Commission of Inquiry into Allegations of State Capture report. The report revealed that the Guptas acquired the mine through its company Oakbay Investments from Glencore.
In 2015, Oakbay made offers but were declined because they were not sufficient to cover the mine’s debt of R2.5-billion at the time.
In his report, commission chairperson Raymond Zondo found that the mine was only sold to the Guptas after the [then] minister of mineral resources, Mosebenzi Zwane, convinced Glencore’s chief executive to sell OCM to the Guptas.
Zondo said the sale agreement concluded for the Oakbay Investments’ subsidiary, Tegeta in December 2015, stating that the mine was ceded for R2.15-billion.
The state capture report suggested that Eskom aided the Guptas in its bid to purchase OCM. As Glencore’s scandals were uprooted since the release of the fourth instalment of the report, it was revealed that the sale of OCM was actually meant to stop load-shedding.
Eskom supposedly lent R1.68-billion to Tegeta as it was financially strained at the time. The agreement was to have the loan paid back with a year’s worth of coal to the power utility.
Matshela Koko, who was the CEO at Eskom at the time, and his associate Anoj Singh, were found to have authorised the payment to Tegeta.
Zondo’s report suggested that Koko and Singh concealed their plan to financially boost the Gupta’s Tetega by claiming that they were addressing the risk of coal supply. Years later, South Africans are still bearing the effects of load-shedding that only seems to be getting worse.
Also read: Glencore continues to bleed Africa
High court grants NPA preservation order of Gupta-owned mine
NPA interference in Optimum Mine’s affairs irks community
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