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Thursday Sep 22, 2011

Cotswold creditors accept rescue plan, but company needs 'white knight'

Option holders in the Cotswold Downs golf estate - who were facing a collective loss of about R84 million, with interest, after the management company was placed into liquidation last year - have accepted a proposed "rescue plan" that will see them putting in about R16m more to secure their sites.

This compromise, which was made an order of court by Durban High Court Judge Jerome Mnguni yesterday, will help boost investor confidence in the upmarket Hillcrest estate because it will reflect as a "bulk sale" of nearly 100 sites.

But the management company, which is still under provisional liquidation, is not yet out of the woods and a "white knight" is still needed to rescue it from financial ruin.

The compromise plan - aimed at bailing out those who had given "loans" in return for first refusal on sites - has the backing of more than 125 creditors of the management company, whose claims exceed R200m.

These include two secured creditors (banks), three preferred creditors (Sars and the municipality) and 91 of the 102 option holders who will now have to sign new agreements before the end of this month to take transfer of the sites.

According to a report before the court, the extra payment has been calculated on the assumption that they would have taken transfer on the original deemed date and would have been paying rates, levies and golf club subscriptions since then.

Those who do not wish to participate will remain concurrent creditors, essentially standing at the back of the queue when a dividend is declared.

However, the agreement by the majority means that the company's books will be boosted by the R16m - and this will benefit the remaining creditors.

The Mercury reported last month that directors Keith Wakefield and Nico van Rooyen had, through another company, Sherpa Trade and Investment, "bought" the R40m debt owed to First Rand Bank, which instituted liquidation proceedings, and ceded it to Investec.

This meant that they, too, would benefit from any increased dividend brought about by the option holders' agreement. In his affidavit before the court yesterday, liquidator Pierre Berrangé said while Sherpa and Investec had supported the proposal, they were banned from voting because the deal had been done after the commencement of winding-up proceedings.

The Mercury understands that not all the option holders can afford to take up the compromise offer.

At least one had bonded her existing home to take up the option.

Berrangé also advised people to seek independent legal advice because accepting the compromise could preclude any legal action against the company's directors in future.

The main application for final liquidation of the company will be back before the court at the end of this month.

The Mercury

    
 

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