Picture: BLOOMBERG
Picture: BLOOMBERG

Absa, one of the country’s top four banks, has been accused
by an exotic car dealership of trying to bully it into liquidation with claims that it owes it more than R400m.

The owners of Ballito-based SMD Group, which sells Ferraris, Porsches and Lamborghinis, dispute the amount and said Absa had ignored an offer from a private equity firm to buy the company for almost R200m.

SMD said the latest bank statement showed that it owed Absa only R157m.

The bank has denied acting in bad faith in the matter and brought an urgent winding-up application in the high court in Durban a few days before Christmas. Judge Gregory Kruger refused to consider the matter, saying that it was not urgent. He ordered Absa to pay SMD’s costs.

Approached for comment, Absa head of media relations Phumza Macanda said: "Absa denies any allegations of wrongdoing in their entirety, either by itself or on the part of its employees, and will respond fully to these allegations in the further conduct of the liquidation application, with which it intends to persist."

In his affidavit Absa head of credit Anthony Evens said the initial agreement with SMD had been for a R155m general and floor plan credit facility.

Overdraft facility

He said that since December 2017, SMD had tried to "trade its way out of trouble" and failed.

Evens said that in spite of several indulgences, including a temporary increase in its overdraft facility, it had not been able to reduce the debt.

The bank brought in a consultancy to assess the situation. The consultancy, Engaged Business Turnaround, was of the view that SMD "is borrowing more than it can repay".

"The turnover of exotic cars has dropped markedly in the past three years. Profits are down. An intervention is needed to avoid total collapse of the company," he said.

According to Evens, SMD’s sales of exotic cars had dropped from R244m in the year to end February 2017, (an average of R20m a month), to R69m in the eight months to end October (an average of R8.6m).

Gross profit dropped from R9m in the 2017 financial year to a loss of R8m in the eight months to end October.

But SMD’s Shaun Duminy said the Engaged report actually stated that the core business was "healthy, well located and has strong franchises".

The report has not been submitted by either party in their court papers and is considered confidential at this stage.

In his affidavit, Duminy said there were disputes that could only be resolved by a full trial "where the bank will be hard pressed to prove its claim".

He said the initial credit agreement, now relied on by the bank in its legal action, had terminated in August 2017.

While Absa claims the dealership owes R434m, the latest statement from the bank reflects that SDM owes R111m, and R46m for the floor plan.

The business had also managed to repay R107m of debt in the past 12 months. Six deals done in early December, for vehicles ranging in price between R200,000 and R2m, were at risk because the bank was refusing to allow the transfers, Duminy said in his affidavit.

He said Evens had also not disclosed that Chroma Capital wanted to purchase the business for R182m, exclusive of the value of the stock.

"He is aware of this but instead is seeking to destroy
the business. He mocked it as being a front, when it is a professional organisation run by investment bankers."

He says a report submitted by auctioneer Peter Maskell proved that asset value which he could realise (R6.9m from the sale of unencumbered stock) is incomparable to the value of the offer from Chroma.

"It just lacks commercial logic," Duminy said.