Embattled financial services private equity group Ecsponent is facing more troubles; this time within its Mauritian subsidiary wherein the group is investigating the possible misappropriation of as much as R125.2 million.
“The board of directors of Ecsponent, through an internal investigation, noted that US$7.5 million [around R125.2 million] of funds received by a Mauritian based subsidiary of the Company under a third-party loan facility, may have been misappropriated. The facility was advanced by a third-party lender and is guaranteed by the Company,” Ecsponent noted in the statement.
The group advised the market that its board had “instructed” for a “forensic investigation into the use and distribution of the funds from the facility”.
Ecsponent added that based on recommendations from the company’s external forensic investigators and legal counsel, the board has instructed its lawyers to institute legal action against “certain parties” whom the board believes are potentially liable.
“The ability of the company to service the ongoing monthly interest and repay the principal amount of the facility, 50% which is due in May 2021 and the remaining 50 percent in September 2021 has been impacted due to the alleged activities of the offenders,” noted Ecsponent.
It said that as of Tuesday (1 September 2020), the overdue interest and penalties on the loan facility amounted to just over R10.58 million (or around US$ 621 910).
“Accordingly, the board is actively seeking to renegotiate the terms of the facility with the lender. Although the lender is entitled to make demand for the entire debt owed and has reserved its rights against the borrower [Ecsponent’s Mauritian subsidiary], the lender has not yet accelerated debt repayments,” the company added.
Another of its subsidiaries, South African based Ecsponent Financial Services (EFS), had its financial services licence withdrawn by the Financial Sector Conduct Authority earlier this year. EFS has since been closed and two key directors at the company – Floris Slabbert and Anton Hay – were debarred by the FSCA for a period of two years.
Meanwhile, Ecsponent said in its Sens statement that it “is committed to resolving the situation [within its Mauritian subsidiary] by seeking to find a solution that is mutually acceptable to all parties”.
Commenting on a broader group level, Ecsponent added that it “continues to work proactively with all stakeholders to improve its liquidity, its overall debt profile and [the] long-term growth of its private equity portfolio”.
The group also reported its results for the nine months ending 31 March 2020 on Tuesday, after it changed its financial year end. Ecsponent posted a significantly wider headline loss per share from 12.64 cents to 186.50 cents per share and thus no dividends were declared.
The value of Ecsponent’s total assets plunged by more than half, from R3.17 billion to R1.51 billion according to its results Sens statement.–ebuisnessweekly.co.zw