PRETORIA – The PIC Commission of Inquiry into allegations of impropriety at the Public Investment Corporation (PIC) continued this week when its employee, Botsang Morobe, gave evidence about the billions of rand that funded a black economic empowerment deal with a sole beneficiary involving the Lancaster 101, which spent R9.6 billion to buy a 3 percent stake in Steinhoff.
Morobe, who is currently employed by the PIC as an Associate Principal in Isibaya Private Equity and Structured Investment Products, revealed in her testimony how Lancaster 101 and various advisory firms, were paid hundreds of millions of rand in transaction and advisory costs, Ratio Collar Premiums and acquisition costs.
Businessman Jayendra Naidoo is the chairman of Lancaster 101 and was the sole beneficiary of a controversial R9.4 billion transaction involving Steinhoff International and the PIC.
The Lancaster 101 transaction, dubbed Project Sierra during the pitching process, was approved on August 5 2016. In her testimony, Morobe said the following transaction costs were paid in relation to the deal.
R9 Billion was paid towards the acquisition of shares. Transaction costs stood at R100 million while a Ratio Colar premium (a type of insurance contract) of R350 million was also presented.
Breaking down the costs, in line with the pararmeters of implementing the deal, she revealed that the PIC paid Steinhoff R5.33 billion for the acquisition of non-delta shares in the company for Lancaster 101. The PIC paid another R3.91 billion to Citibank for delta shares in the company for Lancaster 101.
It paid an additional R76.96 million in advisory fees to a company called Symphony as well as a cash payment to Lancaster 101 of R22 million. In the deal, Standard Bank received R200 000 in agent fees.
The total amount disbursed by the PIC to Project Sierra was R9.4 billion, over 12 payments. Morobe revealed that 10 payments of R900 million were made, R1 payment of R350 million and one payment of R50 million was made.
Other companies that benefitted from advisory fees include Clifford Chance, which served as Citibank’s legal advisors.
ENS was the legal advisor to Lancaster Group l, while DM5 served as legal advisors to the PIC. Symphony served as legal advisors to Lancaster Group.
“The PIC has entered into a Global Market Security Lending Agreement with Citibank under which, Citibank can borrow Steinhoff shares from the PIC to maintain the ratio. The stock loan could be made through intermediaries including, inter alia, Deutsche Bank,” she said.