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EXCLUSIVE: Gupta lieutenant Salim Essa in last gasp R70m bid to 'save' VR Laser

Jun 14 2018 09:16
Kyle Cowan

Gupta lieutenant Salim Essa has launched a desperate bid to keep engineering firm VR Laser afloat with an offer for a R70m cash injection months after the company first ran into financial trouble.

The offer came minutes before creditors for the Boksburg-based engineering company were about to vote for liquidation during a meeting held with business rescue practitioners at a hotel near OR Tambo International Airport on Tuesday.  

VR Laser is among seven Gupta companies that were placed under business rescue in February.

Essa's company, Elgasolve, owns 69% of VR Laser, making it the largest shareholder and, thanks to a R220m "shareholder loan" VR granted Elgasolve, the company is also the largest creditor - meaning it has the highest percentage of voting power in terms of the business rescue process.

Creditors have to approve the business rescue plan put forward by business rescue practitioners through a voting process.

But it has also emerged that VR Laser's shareholders care more for their pocket than the roughly 200 employees, none of whom have been paid since the end of April.

Employees shouldn't think of themselves

Ravindra Nath, Oakbay's group chief financial officer and Tegeta CEO, shocked VR Laser staff and creditors when he said "employees should not only think of themselves" during a discussion over the future of the firm.

His comment was met with a chorus of disbelief, with one man calling him "crazy".

Neither Nath nor Essa responded to emailed requests for comment on Wednesday.

Nath had suddenly produced a mandate signed by Essa, giving him the rights to "negotiate" on Elgasolve's behalf in the dying moments of the meeting.

"I agree that the employees are losing money. But just imagine how much money the shareholder is going to lose, and how the other creditors are going to lose," Nath said in response to an outburst from a staff representative over an apparent lack of empathy from the shareholders.  

"So, employees should not think only of themselves," Nath added.

Later, Nath claimed that he could not stand by and watch VR Laser be liquidated and risk "R200m going down the drain".

Nath was adamant that the largest creditor, Elgasolve, would not vote in favour of liquidation.

Liquidation on the table

According to business rescue rules, if the business cannot be run successfully and no offers to purchase the entity were on the table, creditors could vote for a controlled liquidation or the business rescue practitioners would be forced to fulfil their statutory obligations, and initiate liquidation through the courts - which could take years.

SPECIAL REPORT: #GuptaLeaks

Liquidation for VR Laser is a real possibility after five offers to buy VR Laser fell through as a result of Denel's cancellation of its contract, according to the business rescue practitioners.

Nath, representing Essa and Elgasolve, promised that by close of business next Tuesday, a formal written offer will be presented to the business rescue practitioners.

The offer will provide a timeline of a bank guarantee and payment of roughly R70m to the business rescue practitioners, for VR Laser's benefit, within 60 days.

VR Laser owes concurrent creditors roughly R16m and has a R30m overdraft with Bank of Baroda that must be honoured. Baroda holds security on the overdraft in the shape of a guarantee over movable assets owned by VR Laser.

An injection of this amount from Elgasolve will effectively save VR Laser.

Nath was confident that a bank guarantee for the amount would be arranged - but would not be drawn into questions over which bank would provide this facility to Elgasolve - which is likely perceived as "tainted" by South African banks, due to Essa's proximity to the politically exposed Gupta family and his links to state capture.

One of the business rescue practitioners, Louis Klopper, has previously stated that VR Laser is owed R40m by state-owned arms manufacturer Denel. Denel, however, is pleading poverty and has explained it will not be able to pay the Gupta firm anytime soon.

Creditors remain uncertain

Minutes before the creditors meeting got underway, an offer for a three-year management agreement was presented to the business rescue practitioners by diamond miner Blain Capital Solutions - but the terms were not agreeable, particularly for Bank of Baroda, and the offer was formally withdrawn.

Nath then presented Elgasolve's offer.

Elgasolve is 100% owned by Essa and is VR Laser’s largest shareholder at 69% and creditor, due to a R220m shareholder loan which VR Laser granted Elgasolve.

According to a source close to VR Laser, this shareholder loan dated early 2015 was introduced to VR's books to offset the voting powers a third party who loaned the firm R85m would have held.

VR paid the loan back to the as yet unidentified party, but never removed the shareholder loan - which is proving a massive bonus for Essa and Elgasolve, as he now - in terms of the business rescue process - has the voting power to outvote all other creditors.

"The money never changed hands," the source explained.

When Klopper described the Elgasolve offer as a "possible scam" Nath exploded - accusing Klopper of "being busy" with scams.

"I can bloody sue you!" he told Klopper, telling him to "mind his language".

Klopper did not respond except to reiterate his questions over the plight of VR Laser's staff.

"What about the staff? What will they do tomorrow, or the next day? Will they be paid?" Klopper asked.

Nath eventually conceded that funds "could be arranged" to at least cover salaries.

News24 understands that Aerohaven, another Gupta company, also holds 10% of VR Laser, while Craysure Investments which is wholly owned by Gupta mining firm Westdawn Investments holds remainder of VR Laser shares.

Former president Jacob Zuma's son Duduzane and Rajesh "Tony" Gupta are both historic shareholders of Westdawn.

VR came close to netting a multibillion-rand joint-venture deal with Denel, aptly named Denel Asia, which in essence, was a proposed business (51% owned by Denel and 49% owned by VR Laser Asia) that would have produced parts for armaments manufacturers in the Asian markets.

The deal was halted after it raised alarm bells at National Treasury.

Klopper on Wednesday said he was not entirely optimistic about the offer from Elgasolve.

"I suppose it's a situation of wait and see," he told News24.

"At the end of the day, it's the workers who suffer."

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