Pula Steel goes under

2017-10-13 09:41:17

In a court order granted recently, High Court judge, Tshepo Motswagole cancelled Pula Steel’s judicial management order of March 2017 and appointed John Hinchliffe as the provisional liquidator giving all stakeholders until December 5, 2017 to show reason why the decision should not be made final.

The court’s decision followed an application by the liquidator of BCL, Nigel Dixon-Warren to place the company under provisional liquidation as the shareholders of Pula Steel had failed to inject fresh funds into the company.

BCL, which is the majority shareholder in Pula Steel, is also the biggest creditor of the steel-making company, which is currently under judicial management. Dixon Warren previously told Mmegi Business that following shareholders’ failure to inject fresh funds into the company he was left with no option but to apply to the High Court for the company to be put under liquidation.

Dixon-Warren’s move came at a time when founding shareholders of Pula Steel, the Verma Family, had asked the High Court to relieve the company’s judicial manager, Vijay Kalyanaraman of Grant Thornton of his duties saying he has contributed to the current unfeasible state of the company and has failed to take the necessary steps to ensure its rehabilitation. The application by Deepak Verma to have Kalyanaraman removed was dismissed with costs by Justice Motswagole.

Pula Steel, which was placed under judicial management in February this year after falling into troubles, is currently owned by BCL (67%), Verma Family (22%) with the remainder held by the Citizen Entrepreneurial Development Agency (CEDA) as well as a company

Creditors of Pula Steel, who are owed P100 million, had given the judicial manager the greenlight to seek a P28 million injection from shareholders for the resuscitation of the company. But the Verma Family, which found the Selebi-Phikwe-based steel manufacturing company in 2012, declined to inject any fresh capital into the company saying they have not been furnished with the proposed turnaround projections by the judicial manager.

On the other hand, CEDA was also understood to have placed ‘obstructive’ conditions before they could inject any fresh capital into the company, a situation that has created friction amongst the shareholders.

Although BCL is currently the biggest shareholder, it is also the major creditor owed about P58 million from a guarantee the mining company had granted on a Pula Steel loan from a local bank.

CEDA is the second largest creditor with the agency owed P15 million in shareholder loans, Botswana Power Corporation (P10 million), scrap metals suppliers (P7 million), employees (P3 million) while an Indian company that provided expatriate workers to Pula Steel is owed P6 million. All employees were retrenched March this year when the company went under judicial management.

Pula Steel was the first company in the country to process scrap metal into intermediate products called billets and was a milestone under BCL’s corporate strategy, Polaris II that hoped to expand the mine’s portfolio to develop an iron production circuit.

The company was setup at an initial cost of P130 million before an additional P53 million was injected into the firm by BCL.