It took only a week in May 2018 to move hundreds of millions of rands in public monies from South Africa’s Unemployment Insurance Fund to an array of offshore entities incorporated in places like Malta and the British Virgin Islands.
What makes this particularly troubling is the fact that Bounty Brands’ founding shareholder — and the largest beneficiary of the dividend — later defaulted on these very debts, triggering a crisis that eventually torpedoed the UIF’s investment. This left several creditors wondering why some of the UIF’s investment hadn’t been used to settle their debts.
However, he chose not to answer several detailed queries regarding the complex series of transactions that effectively converted a portion of the UIF investment into a dividend for Bounty’s shareholders. Von Holdt, Botha and Crispian Dillon, Shayne’s co-founder in Coast2Coast, have all seemingly gone to ground.tried to phone the trio for comment, but they didn’t answer our calls. They also appeared to have read requests for comment sent on WhatsApp, but failed to respond.
The decision to pay the dividend with monies that stemmed from the UIF’s investment warrants serious scrutiny in light of Bounty Brands’ and Coast2Coast’s huge debt load., this debt load sparked a crisis when Coast2Coast Capital and its associated entities defaulted on certain liabilities.The defaults nearly sank the entire group and required a drastic restructuring that ultimately rendered the UIF’s investment next to worthless.
However, as this investigation will demonstrate, Shayne’s broad denials fail to address vital aspects concerning Shepstone Capital’s usage of the UIF’s money. Included in this collection of businesses were well-known brands like Tuffy homeware products and popular apparel labels like Vans, Diesel and Hurley.
Greg von Holdt and Lawrence Mulaudzi, the PIC dealmaker who brought the UIF’s R1.37-billion investment to Coast2Coast. It was from BBH that the group’s shareholders in May 2018 received dividend payments totalling about R580-million, largely bankrolled with the R530-million that came from the UIF investment.
The buy-back deal was concluded before K659 received the UIF’s money, so the outstanding monies owed to Brainspan sat in K659’s books as a loan. The value of Brainspan’s 15% stake in K659 had therefore effectively grown from just R2,250 in 2015 to a staggering R430-million in 2018. But there is a key consideration one has to keep in mind regarding the value of Brainspan’s stake and the R430-million in UIF funds K659 forked out to buy back those shares.
Meanwhile, Brainspan Ventures now sat with R430-million because it had effectively cashed in on its shares in K659, a transaction K659 had financed with the UIF investment. Using the full R430-million, along with additional funds Brainspan had received from K659 through an unrelated dividend, Brainspan forked out €32-million for a stake in Coast2Coast Communications, an entity incorporated in the British Virgin Islands .
This would have given Coast2Coast Communications a valuation of roughly €290-million, or nearly R4.3-billion, a massive figure for a rather obscure-looking entity.How was Brainspan’s €32-million investment in the BVI entity justified? Each payment in this series of transactions was treated as a “shareholder loan”, according to the documents in our possession.This string of transactions we’ve detailed up to this point may seem confusing, but the key takeaway is this:
Meanwhile, having received the €32-million on 16 May 2018, Shepstone Capital immediately utilised this entire amount to subscribe for shares in BBH .Over the years, though, the size of the stake decreased as other investors put money into the group in exchange for equity. To fully explain how this happened, we need to jump back to the period between 2015 and 2017, when Bounty Brands acquired several consumer goods businesses, or vendors, in its South African portfolio.within the broader Bounty Brands and Coast2Coast groups partly stemmed from the manner in which these deals were structured.
Exactly the same thing was done with the outstanding debts owed to four other businesses Bounty had acquired. When these debts were delegated to Shepstone in 2017, Shepstone became liable for paying the R500-million to the owners of the businesses. “Without us moving [the differed liabilities to Shepstone] we were led to believe that the London listing would be impossible,” said one owner of a business Bounty had bought.
Instead of having to pay Shepstone, Rieses and the other Bounty debtor entities now owed money to BBH .To pay the debts the likes of Rieses and Reviva now owed BBH , the accountants from Coast2Coast and Bounty Brands crafted a plan to use the UIF’s investment for this purpose. But BBH didn’t directly plug into K659, which could have been problematic in terms of getting the funds to the UK entity.
BB Enterprises then delegated the receivables to another Maltese entity, Bounty Brands SA , which did actually directly own shares in K659. As far as the above chain of transactions is concerned, there are crucial considerations to keep in mind. In order to reduce the debt it owed BBH , Shepstone had made BBH the beneficiary of the monies it would have received on the back of the deferred liabilities.
This resulted from the Brainspan share buy-back unpacked in Flow 1, and the “shareholder loan settlement” discussed in Flow 2. This means roughly R530-million of the R580-million, more than 90% of the dividend, consisted of monies originating from the UIF investment, with the balance funded with the proceeds from an unrelated transaction.As the largest shareholder in BBH , Shepstone Capital received roughly R375-million of those funds.
These entities — Coyote Corporation, Vale Capital Limited, Azara Limited and Boulder Investment Holdings — were all incorporated in the BVI. So too does Shayne’s claim that most of the UIF’s investment went towards settling the Bounty group’s debts. Another key driver of the R200-million transfer was the bit of accounting magic through which Shepstone became indebted to BBH after Shepstone bought shares in BBH , only to borrow back the monies it paid for the shares.
Those payments were a direct result of the deferred liabilities owed to the businesses Bounty Brands had acquired. We know this thanks to a confidential stakeholder document prepared by Houlihan Lokey, an American financial advisory firm Bounty Brands later appointed to salvage its dire finances.This is when Shepstone Capital defaulted on a number of its “financing arrangements”, according to the document. This included some of its vendor obligations — those deferred liabilities owed to the likes of RJ Genesis and Footwear Trading.
Unfortunately, this restructuring severely diluted the value of the stakes held by the group’s existing shareholders, so the UIF’s R1.37-billion effectively evaporated. By all appearances, Shepstone or its related Coast2Coast entities didn’t utilise the UIF funds to service these debts either. These payments were effected as “shareholder loans” between the various Coast2Coast entities involved in this chain of transactions.
From Coast2Coast Ventures, the R406-million was supposed to pass through all those Coast2Coast entities detailed in Flow 1, but in reverse order — at least according to the payment schedule. The payment schedule doesn’t tell us what Coast2Coast Communications might have done with the money. Thanks to other documents we’ve obtained, however, we can venture a few guesses.
In June 2017, Coast2Coast’s tax advisers were fielding queries from Shayne’s colleagues regarding the Lighthouse Trust. Shayne expressly denied that any of the UIF funds had flowed to him via the Lighthouse Trust in the manner discussed in the email.
PLMyburgh These guys must be arrested and rot in jail for stealing from the poor. Unfortunately when smart white guys steal they always get away, they seem to hire the right legal eagles and not Dali Mpofu
PLMyburgh Great work! 👏👌
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