Business

Warren Thompson
5 minute read
11 Jan 2018
8:08 am

How Markus Jooste took Christo Wiese for over R200 million

Warren Thompson

Things are getting ugly in Stellenbosch.

Moneyweb sent a copy of this article to Christo Wiese and Stefan Potgieter (a director of Mayfair Speculators and Markus Jooste’s son-in-law). Christo Wiese declined to comment. Stefan Potgieter did not respond. We also made attempts to reach representatives of Mayfair through its lawyers of record. Our phone calls and messages went unanswered – WT.

In an almost unbelievable turn of events, it seems Markus Jooste has betrayed the man he once looked up to as a young articled clerk, the man who was his mentor and who ultimately became his business partner.

The papers filed before the Western Cape High Court last month by Absa bank to have Markus Jooste’s Mayfair Speculators liquidated reveal how he removed nearly all the assets from the company before leaving his good friend Christo Wiese on the hook for over R200 million.

The story began almost exactly a year before, in December 2016, when Mayfair, represented by Jooste’s son-in-law Stefan Potgieter, and Absa concluded a financing arrangement, which saw the bank providing Mayfair with an overdraft facility amounting to R335.6 million and bank guarantees of a further R14.4 million (in total R350 million). To secure this, from Jooste, Absa received a suretyship of R100 million and cession of a share portfolio consisting of Steinhoff shares.

In addition though, the court papers reveal that Absa required “an unconditional, irrevocable on demand limited guarantee by Upington Investment Holdings” for an amount of R350 million “pursuant to which Upington would guarantee the due and proper performance by the Respondent of all its obligations under the Facility Agreement….” – bank-speak for Upington standing behind any and all obligations of Mayfair up to the limit of R350 million.

Upington Investment Holdings is a registered company in the Netherlands and South Africa and is the primary investment vehicle for Christo Wiese’s shares in Steinhoff, as can be seen from the shareholder register of Steinhoff as at November 24 2017.

No Shareholders as at 24 November 2017 Number of shares held Percentage of total shares Value based on share price of R55.89 (R’m) Value based on share price of R8.70 on 8 January (R’m) Change (R’m)
1 CLEARSTREAM BANKING S.A LUXEMBOURG (Upington) 1 153 178 766 26.8% R64 451 10 032.66 -R54 419
2 GOVERNMENT EMPLOYEES PENSION FUND PUBLIC INVESTMENT CORPORATION 320 729 253 7.4% R17 926 2 790.34 -R15 135
3 CITICLIENT NOMINEES NO 8 HK GW 122 934 974 2.9% R6 871 1 069.53 -R5 801
4 JPMC-OPPENHEIMER LENDING ACCOUNT 115 822 130 2.7% R6 473 1 007.65 -R5 466
5 UBS SWITZERLAND AG- UBS WM UK CLIENT HOLDINGS 100 881 227 2.3% R5 638 877.67 -R4 761
6 UPINGTON INVESTMENT HOLDINGS B.V. 71 150 542 1.7% R3 977 619.01 -R3 358
7 STATE STREET BANK AND TRUST CO-OMN IBUS ACCOUNT-WEST CLIENT 58 108 723 1.3% R3 248 505.55 -R2 742
8 LANCASTER 101 PTY LTD CITI 51 526 717 1.2% R2 880 448.28 -R2 432
9 VANGUARD EMERGING MARKETS STOCK INDEX FUND 44 533 078 1.0% R2 489 387.44 -R2 102
10 FIHAG FINANZ UND HANDELS AG 43 731 538 1.0% R2 444 380.46 -R2 064
11 BUS VEN INVEST NO 1499 (PTY) LTD (P 43 229 864 1.0% R2 416 376.10 -R2 040
12 STEINHOFF INTERNATIONAL HOLDINGS NV 40 377 900 0.9% R2 257 351.29 -R1 905
13 UPINGTON INVESTMENT HOLDINGS BV N1 38 265 935 0.9% R2 139 332.91 -R1 806
14 GOVERNMENT EMPLOYEES PENSION FUND PICIND CAM 37 156 600 0.9% R2 077 323.26 -R1 753
15 SSBTC CLIENT OMNI NON LUX OM01 36 389 917 0.8% R2 034 316.59 -R1 717
16 CITICLIENT NOMINEES NO 8 NY GW 35 624 988 0.8% R1 991 309.94 -R1 681
17 STANDARD CHARTERED BANK AS TRUSTEE FOR CORO BALANCED PLUS FUND   -COBP 35 259 510 0.8% R1 971 306.76 -R1 664
18 STEINHOFF AFRICA HOLDINGS PTY LTD 33 995 232 0.8% R1 900 295.76 -R1 604
19 SSBTC CLIENT OMNI LENDING NON LUX OM79 33 567 872 0.8% R1 876 292.04 -R1 584
20 BBH(LUX) FIDELITY FUNDS-EMERGING MARKETS 32 239 499 0.7% R1 802 280.48 -R1 521
21 UPINGTON INVESTMENT HOLDINGS BV N2 31 000 000 0.7% R1 733 269.70 -R1 463
22 UPINGTON INVESTMENT HOLDING BV(NO1) 29 481 543 0.7% R1 648 256.49 -R1 391

Source: Timbukone, author’s calculations

The bank also took cession of Steinhoff shares from Upington as security, and this explains why we came across shareholders of Steinhoff in the company’s share register that were named “Upington Mayfair Absa Pledge”, as seen below:

No

Shareholder

Number of shares as at 24 November 2016

39

UPINGTON MAYFAIR ABSA PLEDGE

                                   14 490 000

40

UPINGTON MAYFAIR

                                   14 021 454

Source: Timbukone

The Upington Mayfair Absa pledge account held 14.49 million Steinhoff shares at the end of November worth approximately R810 million. In the end though, this was still not enough. Following the upheaval on December 6, when Markus Jooste resigned as CEO, the Steinhoff share price collapsed from R55 to R17, which meant that Mayfair was in breach of its covenants as the outstanding balance of the loan – which stood at R220 million at that point – was barely covered by the value of the shares (R255 million). The difference (or buffer) was nowhere near what had been stipulated in the loan agreement. Absa pointed this out to Mayfair and informed it via a letter the following day that a default event had occurred.

At a meeting held on December 8, Absa was given unpleasant news: Jooste had resigned as a director, and the company was technically and commercially insolvent because it had liabilities of R1 billion and assets of approximately R350 million. This situation, the representatives of Mayfair (which did not include Jooste) told Absa, was largely the result of Mayfair Speculators declaring a dividend in specie of R1.5 billion in August to its parent company, Mayfair Holdings. Also, rather tellingly, by the time Absa had gone to court on December 15, this had not been forthcoming.

The dividend in specie was effectively a transfer of ownership of assets that included houses, development properties, Lodestone Brands and a company that manufactured pipes. Jooste had deliberately moved the assets out of the reach of creditors. And he would have known that his friend, Christo Wiese, had guaranteed obligations to the tune of R350 million.

By December 13, the Steinhoff share price had sunk further to R9.80 a share, meaning the value of the security (R142 million) was now well short of the outstanding amount of R226.3 million. Also, no response had been forthcoming from Mayfair on how it planned to correct the situation. Absa had no choice but to begin selling the shares, initially 6.7 million of them, which raised proceeds of R70 million. It has since instructed the broker to sell the remaining shares.

Assuming an average selling price of R10 a share, the proceeds raised should amount to approximately R150 million. This means that Absa is short about R80 million and counting, which Christo Wiese must now stump up for, in addition to the 14.49 million shares in Steinhoff he ceded and has now already lost. This might be small change next to the over R60 billion that has been erased from Christo Wiese’s balance sheet as a result of the shenanigans and possible fraud Jooste has wrought on Steinhoff, but it will be painful nonetheless since it was inflicted by a man he once regarded as his friend.

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