Court papers involving the litigation between the Industrial Development Corporation (IDC) and an investment holding company co-founded by former Old Mutual CEO Peter Moyo reveals the extraordinary lengths the industrial financier went to when it agreed to a settlement with its embattled borrower.

A Business Day report says the dispute concerns a loan of R33.6m the IDC extended to a subsidiary of NMT Capital, Amabubesi, in November 2006 to enable the company to acquire shares in construction company Basil Read.

NMT was required to provide an ‘irrevocable and unconditional’ guarantee to the IDC for the debt.

By December 2017, the IDC asserts that the loan had grown to R106m, a figure denied by NMT.

In June 2018 Basil Read entered business rescue proceedings (in which it remains) and its shares were suspended from trading on the JSE, effectively rendering NMT’s investment worthless.

After this development, the IDC and NMT began negotiations regarding the outstanding debt and this led to the conclusion of a settlement agreement in November 2018. This required NMT to hand over the 4.64m shares it owned in Basil Read, as well as pay the IDC R15m as full and final settlement for the loan.

Over the 12-year term of the loan, the IDC states that it received dividends of R17.9m from Basil Read via Amabubesi, as well as a R15m cash settlement.

The Business Day report says this means the total proceeds received from the loan (R32.9m) equates to an amount lower than the value of the loan it originally extended, as well as being a small fraction of what it says it was owed.

It was during the course of the settlement negotiations that the IDC asserts that executives of NMT misrepresented the true financial position of the company.

‘NMT Capital was in a dire financial position and that, if called upon to make good on their debt to IDC, that would have placed both NMT Capital and Amabubesi in financial distress,’ was how the state-owned lender described the representations made to it by NMT, according to the papers.

The IDC was informed that NMT’s stake in Growthpoint Properties was valued at about R144 000, whereas in fact NMT had received proceeds of R311m from selling its stake in the listed property company at end-June 2018.

The IDC asserts that NMT had more than enough money in the bank to extinguish its debt at the precise time it was pleading poverty.

This justified its decision to cancel the settlement agreement in July 2019, when Moyo’s relationship with his erstwhile employer broke down over a preference share dividend owed to Old Mutual by NMT and news of the Growthpoint proceeds came to light.

The IDC now wants NMT to repay it R182.9m, ostensibly the amount it says was owed in December 2017, with interest.

The Business Day report notes that in its plea, NMT disputes this description of events, saying that it disclosed its indirect and direct stake in Growthpoint to the IDC in meetings, though it did not state the value it attached to such in its response.

It did, however, concede that it received a payment of R311m from the ‘AMU Trust’, but denies any allegations it misled the IDC over its financial position.

In September 2019, the matter was certified as a commercial case. It has been allocated a judge but has not yet been heard.

Full Business Day report (subscription needed)