Doubts over MKM bailout

MASERU — A South African burial society on Monday said it had raised M2.5 billion to bail out the troubled MKM and repay its nearly half a million investors.
But questions are already being raised about the validity of the rescue package that Iketsetseng Family Life and Burial Cooperative Limited, the Heidelberg-based society, has tabled.
There was also speculation last night that the bailout package could be a ploy to influence the courts on MKM’s current battle to stop the liquidation process.
Justice Michael Ramodibedi, the Court of Appeal president, is expected to hear MKM’s appeal for a stay of execution on Saturday.
MKM is expected to produce Iketsetseng’s bailout package, among other evidence, to justify why the liquidation should be delayed or stopped altogether.
Ntsukunyane Matete, Iketsetseng’s chairperson, told a press conference on Monday that the M2.5 billion would be used to pay nearly 400 000 MKM investors “whose funds have been frozen and compromised by the ongoing litigation affecting the companies” which were shut down by the Central Bank of Lesotho (CBL) in 2007 because MKM was operating them illegally.
Matete said each of his society’s half a million members had contributed M5 000 to help out MKM’s investors and burial society members.
Iketsetseng members, Matete said, had been touched by the plight of MKM’s depositors. “Arrangements with the banks are in process to enable this to happen and therefore it will be required for the individual members of MKM to open banking accounts with the chosen bank, which the fund administrators will advise them within a short time (sic),” Matete said.
“The legally appointed fund administrators, who have already been appointed by Iketsetseng, will advise all affected MKM members in due course what is expected from them.”
“Trade suppliers to the MKM Burial Society, as part of their current liabilities, will also be settled out of the above fund and will also be so advised by the fund administrators.”
“We have resolved to protect the MKM assets so that members can continue to reap benefits and continue to bury their dead in dignity,” he said.
Matete however failed to explain how Iketsetseng’s members would benefit.
Iketsetseng’s only interest is to help suffering Basotho families, he said when asked what his burial society was going to benefit from its M2.5 billion bailout package to MKM.
When asked why Iketsetseng was bailing out companies that have been declared illegal and are already being liquidated Matete was evasive.
“We are not interested in what the courts have ruled, we only want to help MKM to meet its obligations to Basotho who had kept their monies with it,” Matete said.
Although Matete announced the bailout as if it was a “done deal” the liquidators of MKM said they were not aware that Iketsetseng wanted to pay out the troubled company’s investors.
This raises further questions about the whole deal.
Officials at the Central Bank of Lesotho (CBL) said although they were not prepared to speak on record about the issue due to the pending court case they did not take Iketsetseng’s deal seriously.
An official said “the so-called bail-out is just one of the many that MKM has come up with to avoid liquidation”.
MKM boss, Simon Thebe-ea-Khale, told the Lesotho Times he started negotiations with Iketsetseng in 2006.
But he gave a different explanation when asked what Iketsetseng was going to benefit by giving M2.5 billion to MKM.
“Iketsetseng will certainly get something out of the bailout,” he said.
When pressed for specific details Thebe-ea-Khale said he was not prepared to reveal more because the matter was still before the courts.
“We do not want to talk about the details of our agreements lest we talk about things that will be addressed before the Court of Appeal on Saturday,” he said.
He however vehemently denied that the Iketsetseng bailout package was an empty promise meant to strengthen MKM’s application in the Court of Appeal seeking to stop the liquidation.
This is not the first time that Thebe-ea-Khale has suggested ways to save his company from liquidation.
He first proposed to sell part of MKM’s properties and also secure loans from banks.
This he said would help the company free up some funds to pay out investors.
Last year Finance Minister Timothy Thahane told parliament that this proposal was evaluated by the CBL and “found to be unprofessional and lacking in substance”.
Thahane said in that proposal Thebe-ea-Khale disclosed that M502 500 000 was needed to bring the business back to life.
“Prior to making of the statement, Mr (Simon) Thebe-ea-Khale had on several occasions, including under oath in court, stated that the amount owed to members was less than M100 million (sic),” Thahane said.
“There was no indication in the proposal regarding how the M502 500 000 that Mr Thebe-ea-Khale was later admitting to had (sic) been made up or any reason why he had now conceded a new liability figure that was much higher than he had previously stated.”
“No financial institution will lend the significant amounts of money the group would require to borrow to repay the members,” Thahane said.
The buildings, Thahane said, would sell for only about M110 802 705 while members were owed M502 500 000.
“The Star Lion Group would have no way to repay the loans as the money could not be invested in revenue generating activities, since the money would have been used to repay members.”
“None of the Star Lion Group businesses are profitable.”
When this failed Thebe-ea-Khale told the CBL that Channel Life, a South African firm, was willing to bail out MKM.
But the CBL, Thahane said, observed that Channel Life’s solution was not based on injection of capital into the group’s businesses.
“Channel Life, in that sense, clearly did not want to be drawn into the existing liabilities of the group.”
Channel Life was “not willing to accept unlimited exposures”.