Pinnacle Point Group’s management and its creditor, Absa, withheld crucial information that could have stopped Trilinear Empowerment Trust from investing in a company that was about to go under, the commission of inquiry into the factors that led to Pinnacle Point’s liquidation heard yesterday.
Trilinear, which lost millions of rand in pension funds of members of the Southern African Clothing and Textile Workers’ Union, bought R100 million worth of Pinnacle Point shares in October 2009 on the premise that a project that would ensure Pinnacle Point’s continued existence was on track.
Absa and Pinnacle Point told Trilinear that the outstanding issues relating to the group’s proposed property development project in Nigeria, the Lagos Keys, had been sorted out, but this was not so. These included the requirement of a certificate of occupation and two environmental impact assessment certificates from the Nigerian government.
Former Trilinear fund manager David de Waal had approached Absa to find out if the project was on track, but claims that he was misled.
However, Stephen van Coller, Absa Capital’s chief executive, told the commission that the bank “took trust in Pinnacle Point’s management that these issues would be sorted out”, and was simply communicating what it had been told to Trilinear.
“Management was telling us that this would be resolved. There was a lot of trust at hand here that this was going to happen. Otherwise we would not have put in R55m,” Van Coller said.
He said the Pinnacle Point chief executive at the time, Hendrik Pretorius, told Absa that the company had a close relationship with the Nigerian government and that getting the required certificates was a mere formality.
The commissioner, retired Judge Meyer Joffe, asked: “I have difficulty understanding your reply [to Trilinear]. How could these matters have been resolved because the precedent conditions hadn’t been filled?”
Absa also refused to share its due diligence report with Trilinear.
Van Coller said: “
De Waal asked about our due diligence report but I don’t think it was Absa’s responsibility to tell them if the land rights were secured. They were supposed to do their own due diligence or go back to Pinnacle Point.”
But advocate Gavin Woodland laid the blame at Absa’s door for not disclosing what it knew to Trilinear.
“Whether you like it or not, Absa was part and parcel of that transaction,” he said.
Although it was Pinnacle Point’s financial advisers, Rothschild, that proposed that the company issue shares to rescue itself from potential liquidation, it was Absa that came up with the initial rescue plan. It was also the bank that said Pinnacle Point needed to raise R100m from shareholders other than Absa.
The rescue package would consist of a R95m underwriting offer and a R55m bridging loan facility. Pinnacle Point had to raise the remaining R100m through a rights issue.
Absa’s lawyers in Lagos alerted the bank some months before Trilinear offered to buy Pinnacle Point’s shares that without obtaining the required certificates, the Lagos Keys project could not happen. Absa was only going to underwrite the group’s rescue package if this project went through, but it did not stipulate this as a precedent condition.
In February 2010, when Pinnacle Point obtained a certificate that stated the company could not sell undeveloped plots of land, Absa ditched the underwriting agreement. It then entered into an agreement with Trilinear, to which it sold all its shares for R150m.
The enquiry continues today.