How Markus Jooste took Christo Wiese for over R200 million

Moneyweb sent a copy of this article to Christo Wiese and Stefan Potgieter (a director of Mayfair Speculators and Markus Jooste’s son-in-law). Christo Wiese declined to comment. Stefan Potgieter did not respond. We also made attempts to reach representatives of Mayfair through its lawyers of record. Our phone calls and messages went unanswered – WT.

In an almost unbelievable turn of events, it seems Markus Jooste has betrayed the man he once looked up to as a young articled clerk, the man who was his mentor and who ultimately became his business partner.

The papers filed before the Western Cape High Court last month by Absa bank to have Markus Jooste’s Mayfair Speculators liquidated reveal how he removed nearly all the assets from the company before leaving his good friend Christo Wiese on the hook for over R200 million.

The story began almost exactly a year before, in December 2016, when Mayfair, represented by Jooste’s son-in-law Stefan Potgieter, and Absa concluded a financing arrangement, which saw the bank providing Mayfair with an overdraft facility amounting to R335.6 million and bank guarantees of a further R14.4 million (in total R350 million). To secure this, from Jooste, Absa received a suretyship of R100 million and cession of a share portfolio consisting of Steinhoff shares.

In addition though, the court papers reveal that Absa required “an unconditional, irrevocable on demand limited guarantee by Upington Investment Holdings” for an amount of R350 million “pursuant to which Upington would guarantee the due and proper performance by the Respondent of all its obligations under the Facility Agreement….” – bank-speak for Upington standing behind any and all obligations of Mayfair up to the limit of R350 million.

Upington Investment Holdings is a registered company in the Netherlands and South Africa and is the primary investment vehicle for Christo Wiese’s shares in Steinhoff, as can be seen from the shareholder register of Steinhoff as at November 24 2017.

Source: Timbukone, author’s calculations

The bank also took cession of Steinhoff shares from Upington as security, and this explains why we came across shareholders of Steinhoff in the company’s share register that were named “Upington Mayfair Absa Pledge”, as seen below:

Source: Timbukone

The Upington Mayfair Absa pledge account held 14.49 million Steinhoff shares at the end of November worth approximately R810 million. In the end though, this was still not enough. Following the upheaval on December 6, when Markus Jooste resigned as CEO, the Steinhoff share price collapsed from R55 to R17, which meant that Mayfair was in breach of its covenants as the outstanding balance of the loan – which stood at R220 million at that point – was barely covered by the value of the shares (R255 million). The difference (or buffer) was nowhere near what had been stipulated in the loan agreement. Absa pointed this out to Mayfair and informed it via a letter the following day that a default event had occurred.

At a meeting held on December 8, Absa was given unpleasant news: Jooste had resigned as a director, and the company was technically and commercially insolvent because it had liabilities of R1 billion and assets of approximately R350 million. This situation, the representatives of Mayfair (which did not include Jooste) told Absa, was largely the result of Mayfair Speculators declaring a dividend in specie of R1.5 billion in August to its parent company, Mayfair Holdings. Also, rather tellingly, by the time Absa had gone to court on December 15, this had not been forthcoming.

The dividend in specie was effectively a transfer of ownership of assets that included houses, development properties, Lodestone Brands and a company that manufactured pipes. Jooste had deliberately moved the assets out of the reach of creditors. And he would have known that his friend, Christo Wiese, had guaranteed obligations to the tune of R350 million.

By December 13, the Steinhoff share price had sunk further to R9.80 a share, meaning the value of the security (R142 million) was now well short of the outstanding amount of R226.3 million. Also, no response had been forthcoming from Mayfair on how it planned to correct the situation. Absa had no choice but to begin selling the shares, initially 6.7 million of them, which raised proceeds of R70 million. It has since instructed the broker to sell the remaining shares.

Assuming an average selling price of R10 a share, the proceeds raised should amount to approximately R150 million. This means that Absa is short about R80 million and counting, which Christo Wiese must now stump up for, in addition to the 14.49 million shares in Steinhoff he ceded and has now already lost. This might be small change next to the over R60 billion that has been erased from Christo Wiese’s balance sheet as a result of the shenanigans and possible fraud Jooste has wrought on Steinhoff, but it will be painful nonetheless since it was inflicted by a man he once regarded as his friend.

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