IDC to sue Oakbay over loan repayment failure

The cash-strapped, Gupta-owned Oakbay Resources & Energy’s woes have escalated with news that the Industrial Development Corporation (IDC) is suing it for its failure to meet a demand to pay R293m by yesterday. A BusinessLIVE report says the claim arises from the alleged unlawful manipulation of the Oakbay share price ahead of the company’s listing on the JSE in November 2014. The allegations, investigated by the Financial Services Board, were that a Singaporean entity funded by the Gupta family bought shares in Oakbay just prior to its listing in order to boost the share price. IDC divisional executive for transaction support and post investment, Gert Gouws, reportedly confirmed last night that the money had not been paid by the deadline set and that legal action would proceed. According to reports Oakbay has no cash to pay the claim. In June it announced that its cash supply had dwindled from R225m to R2.7m. Economic Development Minister Ebrahim Patel said in a statement that on the basis of legal advice the IDC board had rescinded, alternatively cancelled, the loan restructuring agreement between itself, Oakbay Resources and other entities in the Oakbay group on the grounds of ‘various misrepresentations and breaches of warranties’, which were committed. In terms of this loan restructuring agreement the IDC acquired shares in Oakbay Resources following its listing in late 2014. The IDC has tendered the return of its shares in Oakbay Resources and demanded repayment of the outstanding capital and interest due to it, totalling about R293m.

Full BusinessLIVE report

The matter stems from a loan IDC gave to the group before it listed on the JSE in 2014, says a Fin24 report. After the listing the loan was converted into stock. Patel said that, following media reports earlier in the year that Oakbay and ‘persons and entities associated with it, engaged in unlawful manipulation of (its) share price’ he launched an investigation. ‘In July, the IDC board appointed a legal team to advise it, led by Advocate Geoff Budlender SC, a respected member of the Cape Bar. Following an investigation by the legal team, and advice received from them, the IDC has now rescinded, alternatively cancelled, the restructuring agreement,’ he said.

Full Fin24 report