Johannesburg - It was a well thought out plan, the strategy by Absa Bank to take over control of Pinnacle Point, but somewhere down the road something changed and it resulted in the fall of the golf estate developer.
The first move by Absa was to buy a chunk of the group’s equity and then send in Hendrik Pretorius to execute its plan as the head of Pinnacle.
But if Absa’s master plan was to control Pinnacle, what led to the bank’s change of heart about approving a loan that was so crucial to Pinnacle’s survival?
This is the question the Commission of Inquiry into the financial affairs of Pinnacle that has yet to unearth answers to when it resumes later in November.
Last week the commission reopened the inquiry for three days even though it had already produced a report of findings in July.
When the earlier findings were released, the Southern African Clothing and Textile Workers’ Union (Sactwu), whose members lost about R400 million in retirement savings as a result of Pinnacle’s fall, asked the commission to look at Absa’s role in Pinnacle’s liquidation and subsequently, the loss of its members’ money.
Sactwu members’ retirement money, which was invested in the Trilinear Empowerment Trust, got involved in Pinnacle when Absa sold the 27 percent stake it held in the golf estate developer to Trilinear.
It was as if Sactwu had a prophecy of Absa’s influence at Pinnacle because when the inquiry reopened, it became clear that the bank had a lot of influence.
The commission examiner, Gavin Woodland, even went on to say that Jacques Schindehutte, Absa’s chief financial officer at the time, seemed to have been pulling strings at Pinnacle.
“You’d think Schindehutte is running the company and that he’s the employee of Pinnacle,” Woodland said.
The commission heard that at one point in Pinnacle’s pursuit to secure a R500m loan from Absa, Schindehutte scripted what each of Pinnacle’s directors were going to say in a presentation to Absa executives, including himself.
But despite him giving the Pinnacle directors the words, the company could not secure the essential loan.
Whether the scripts were a sabotage was something the commission could not conclude, as the evidence on the table at that point suggested Pinnacle’s proposal failed to impress Absa chief executive, Maria Ramos, which led to the withdrawal of the vanilla loan offer.
The initial offer was replaced with a watered-down one, which the commission described as a proposal that went from “vanilla to sugar-free”.
Absa underwrote R95m of the share issue and then converted its loan account into shares instead of giving Pinnacle the R500m it needed. And the bank wanted a chunk of what would be raised.
So Absa went from being a 27 percent shareholder that had promised to put R500m into Pinnacle and a bank that wanted to look after its financial interest, to a lender that was more concerned about investing in risk than saving its investment.
The question is what changed and the commission was eager to hear about this. Sactwu had required that the commission subpoena Absa to testify, but Woodland could not confirm if the bank would be taking the stand when the inquiry resumed.
But testimony given by Pretorius, the man who was going to be an accessory to Absa’s master plan, pointed out one crucial fact that could possibly fit the pieces of the puzzle together.
He said in the deal with Absa that there was an intention to include arrangements for the bank to control Pinnacle’s voting rights through its share, as well as Pretorius’s voting powers. But Absa later received legal advice that this would not be possible.
It was not clear whether Absa’s change of heart about the loan came after this. In Pinnacle’s communication with Absa, while the company was still pursuing the bank for the vanilla loan, it constantly stated that if this funding did not come through, it would be forced to liquidate.
Absa’s acquisition of Pinnacle’s shares has been surrounded by a lot of share manipulation accusations.
Pinnacle’s financial director Steven Kruger told the commission how the group’s share price on the JSE dropped by 31 percent during a period where there was very little trade. One day in 2008, there was a trade of 36 500 shares and it wiped out R1.2 billion of the company’s market capitalisation. To this day, Kruger said they believe it was illegal, even though the JSE said there was nothing wrong with that trade.
Pinnacle’s share price began a free fall since the single-stock futures debacle in 2008. When Absa acquired the 27 percent share for R931m, this was said to a be a fraction of the cost those shares were worth a couple of months earlier.
“They watched the share climb, took away the support from the share, the share crashed and they took over Pinnacle at a much lower price,” Kruger said.
But he said they were still comfortable having the bank as a major shareholder because Absa had given Pinnacle every reason to believe it would support the company.
But the commissioner, retired Judge Meyer Joffe, said there was no criticism to be levelled at Absa as the bank was not obliged to support the golf estate developer financially just because it had acquired its shares.
Kruger said the decision by Absa to pull away financial support played a major role in other major funders, including Investec and Nedbank’s loss of confidence in Pinnacle.