Standard Chartered (StanChart) and the African Banking Corporation (ABC) are challenging a decision by the Gauteng High Court (Johannesburg) that found the banks colluded to breach a debt-restructuring agreement that spelt the death of then JSE-listed Blue Financial Services (Blue) in 2013.

The court in August ordered StanChart and ABC to pay Mapula Solutions R704m plus interest calculated from 2016 after the court found they breached recapitalisation agreements intended to save the now defunct microfinance institution, reports BusinessLIVE.

Mayibuye Group, which specialised in turning around distressed businesses, invested R163m in the lender.

Before ceding its rights to Mapula, Mayibuye proceeded to separate Blue’s insolvent and underperforming business from what was planned to become a new, restructured and recapitalised business, referred to as Good Bank.

StanChart and ABC were involved in the recapitalisation that would see Mayibuye buying shares worth R163m in Good Bank, and creditors including StanChart and ABC converting as much as R1.2bn of debt into equity.

However, the agreement encountered problems in late 2013 when StanChart and ABC called in their loans.

The crux of the August judgment was that the lenders breached the debt-restructuring agreement when they called in the loans, which according to the court sealed Blue’s fate.

StanChart and ABC, in their appeal papers, claim the court erred in arriving at its conclusions.

‘In the first instance, the court a quo found that the single breach (being the dispatch of a letter of demand) by the first defendant resulted in the plaintiff’s damages (on both claims),’ the banks said.

‘However, the court a quo has ignored that at the time the letter of demand was sent Blue’s shares were already suspended from trading on the JSE, which demonstrates that the defendants could not have caused the plaintiff’s loss (because the damage, such as it is, had already been sustained).’

Mapula, in its papers, accuses StanChart and ABC of trying to straddle two chairs, reports BusinessLIVE.

‘The defendants say they could not have breached the debt-restructuring agreement as they had obtained a judgment in their favour which is affirmation that their conduct was not a breach. That naturally means there is a binding debt-restructuring agreement on which the defendants place reliance,’ the entity said.

‘The defendants then advance two conflicting theories that the debt-restructuring agreement somehow became “inoperable” and, for that reason, they were no longer bound to it, at a time earlier than the judgments referred to above and could therefore not have breached it. The conflicting outcome is that, on the one hand, the defendants say they were bound to the debt-restructuring agreement whereas, on the other, that they were not bound to the very same debt-restructuring agreement.’

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