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Thursday Nov 28, 2013

'Land clause sank Pinnacle Point'

Pinnacle Point Group has its business model to blame. And if it had received a 'clean' certificate of occupation for the Lagos Keys project in Nigeria, it could still be alive.

This was the argument put forward yesterday by Absa Capital chief executive Stephen van Coller to the commission of inquiry into the developer's liquidation.

The model was that the luxury golf estate developer would get the land rights in Lagos and sell undeveloped plots to generate money for the development.

But when it finally got its certificate of occupation (COO) in February 2010, months later than the initial deadline posed by its creditor, Absa, it had an unexpected condition: no undeveloped plots could be sold from the acquired land.

'They had to find a lot more money to put the services in before they could sell it. It was that condition on the COO that got them into trouble, not us. They got all the money they had asked for,' Van Coller said.

He said although Absa sold on its underwriting agreement, the R95 million in the underwriting offer went to Pinnacle Point along with R55m in a bridging loan facility. That, along with the R100m that Trilinear Empowerment Trust had invested when it subscribed to Pinnacle Point shares in October 2009, meant the R250m funding gap identified by the company was plugged.

'They got all the money. We didn't put it in, someone else, Trilinear put it up... [the liquidation] had nothing to do with us selling our underwriting agreement to Trilinear,' he told Business Report after the inquiry, which continues today.

Nigeria normally allows companies to sell undeveloped plots. The contrary condition to Pinnacle Point's COO was a specific addition that management did not expect. It was outside the usual legal framework.

Although Pinnacle Point's underwriting agreement with Absa had no precedent conditions, the golf estate developer had warranted that it would get controlling stakes in Pinnacle Point West Africa and in Lagos Keys. Another warranty was that Pinnacle Point would obtain the COO and two environmental impact assessments as needed to make the transaction bankable for Absa.

But Pinnacle Point breached the underwriting agreement when Absa found out it did not have the controlling shares in Pinnacle Point West Africa or in Lagos Keys. It was later rectified when the shares were transferred on December 4, 2009.

But Absa still terminated the underwriting agreement in February 2010 and sold its entire stake in Pinnacle Point to Trilinear.

The commission's lead examiner, Gavin Woodland, SC, said there were suggestions that Absa was already looking for a reason to escape the underwriting agreement in December 2009. He also said that by January 25, 2010, before Absa sold its stake, there were no prospects of survival for Pinnacle Point.

But Van Coller maintained that anything was possible, until the COO was granted. He said Absa did not offload its shares because there was no hope for Pinnacle Point. He said Absa had sold its stake before it became aware of the clause. The decision to exit the investment was because Pinnacle Point was in breach of the underwriting agreement.

Business Report


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