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Cape Town – The businessman accused of colluding with Mercantile Bank in alleged illegal asset stripping worth hundreds of millions of rand said he will “vigorously defend this action” as he believes the case “is based on unfounded allegations”.
Alert Steel is seeking damages of R351m caused by businessman Rayhaan Hassim, his company West Lake Trade and Investments, and Mercantile Bank following what it believes was an illegal liquidation process in 2014. ArcelorMittal South Africa has joined Alert Steel as a second plaintiff in the matter.
“I intend to vigorously defend this action,” Hassim said in a statement on Wednesday, adding he believes the case is “fraught with inaccuracies”. He denies colluding with Mercantile Bank.
Hassim suffered financial losses as a result of the liquidation of Alert Steel, as he was a shareholder of the firm at the time, he explained.
“As he (Hassim) was neither a director nor a member of the board, he was not involved in any of the decision-making related to the liquidation of the company or the sale of its assets,” his statement explained.
“Alert Steel’s assets were purchased by West Lake after the company was liquidated in 2014,” Hassim explained.
“We have sought counsel from a team of senior advocates in this matter,” said Hassim. “They advise us that not only is the summons defective, but that same is seemingly baseless.
“As the matter is sub judice, he is unable to respond in detail to the allegations made in a summons received on the 11 July 2017.”
In a summons sent to the defendants, Alert Steel claims it “conspired to devise and implement a scheme, to transfer the plaintiff's business and all its assets to a new company held by Mr Hassim (West Lake); to pay the plaintiff's loan liability to Mercantile Bank in full; and to put the plaintiff in liquidation”.
“The purpose of the scheme was to appropriate all the plaintiff's assets for the benefit of Mr Hassim and Mercantile Bank at the expense of the plaintiff's other creditors,” Alert Steel said claimed.
Mercantile defends actions
Mercantile Bank CEO Karl Kumbier told Fin24 on Monday that the bank also “intends to rigorously defend the matter” as it believes the case is “fraught with factual inaccuracies”.
The matter comes as Portuguese bank Caixa Geral de Depósitos is in the process of selling Mercantile Bank, which has a balance sheet of R12.2bn and R2.2bn in capital.
Mercantile believes the case will not affect the sale of the bank.
“We can confirm that Mercantile lent Alert R104m in the normal course of business,” Kumbier told Fin24. “As any prudent lender would have done, the bank was entitled, and within its rights, to call in that loan when Alert breached the terms and conditions attached to it.
“That said, the bank worked with the business rescue practitioner for around two months to find a buyer for the whole or a part of the Alert business and, while a few well-known industry players showed interest, none proceeded with any offers to purchase the business or even part thereof.
“When the bank was advised of Alert’s imminent liquidation, external legal advice was sought and we perfected our general notarial bond. On Alert’s liquidation, six liquidators were appointed.
“The liquidators sourced the buyer after employing a sworn appraiser to value Alert’s assets (which were eventually sold at values in excess of those provided by the appraiser) and, on application by the liquidators, the Master of the High Court approved the sale of the assets.
“The bank did not recover all the money that it was owed by Alert.”
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