Deadline for MKM investors

Deadline for MKM investors

MASERU – MKM creditors have until the end of this month to register their claims with the liquidators or lose everything they invested in the collapsed Ponzi scheme.
The registration will allow the creditors to become shareholders in the company that the liquidators are proposing to form out of the remaining properties of MKM.
Creditors will convert their claims against MKM into shares in the new company.

But for that to happen they have to register their claims before the June 29 deadline, according to Attorney Qhalehang Letsika, one of the liquidators.
Claims are being lodged at Webber Newdigate’s offices, at the Metropolitan Building opposite the State Library.

“If you don’t register it means you will not be a shareholder in the new company,” Letsika said.
He said after the registration is closed creditors will have a meeting on July 23 to approve the arrangement. The arrangement will still need the High Court’s approval before the new company is formed.

Letsika said those who have proof that their deceased relatives were investors in MKM should also register claims.
“Who will benefit from those shares in the new company will be determined by the inheritance laws of the country.”
The High Court has appointed Advocate Salemane Phafane as chairman of the creditors’ meeting.

Letsika said once the registration has closed there will be no opportunity for creditors to lodge claims against the MKM estate.
The arrangement, he said, was the only way for the MKM creditors to recoup their losses.

“After selling some of the assets MKM had to pay some contractors and suppliers. There was also a huge administration fee. That left next to nothing for the creditors,” he said.
“Even if we were to sell the remaining properties the money we will raise is not enough to pay even a quarter of what MKM owes to its creditors.”
“The formation of a company in which the creditors own shares was therefore the best option available. That way they can recoup their losses in the long run and also get to invest in other areas or buy more properties to grow their business.”

How much a share in the new company is worth is yet to be decided. Court documents however show that there are nearly 10 000 investors whose claims against the company have been verified and quantified. Auditors have estimated that these investors lost M128 million.

To qualify for shares in the new company creditors will be required to produce records of all transactions with the MKM companies.
Such documents include receipts, contracts and bank transfers which should tally with the transaction records held by the liquidators.
Last year the liquidators raised M115 million from the sale of three MKM properties.

The former Agric Bank building, along Kingsway road opposite Queen Elizabeth II Hospital, and in which FNB Lesotho is the main tenant, was bought for M58 million by Sekhametsi Investment Consortium, a venture capital company.

The new and yet to be occupied building opposite Pioneer garage and next to Sparrows Bar was bought for M43 million by Executive Transport, a haulage company.
Executive Transport also paid M14 million for the dilapidated building opposite Selkol along Moshoeshoe Road.
thepost understands that nearly half of what was raised went to a company that was hired to reconstruct MKM’s shambolic financial records.

In justifying the proposed arrangement the liquidators claim that the cost of administration of the MKM Star Lion Group Estate “have been high because of inadequate books and records that had to be reconstructed and because of various legal battles and the need to protect the estate and creditors from various attempts to disrupt the estate”.
“If the liquidation is to continue it is likely that further substantial costs will be incurred.”

They say trying to recover money from those who made profits from the MKM scheme will cost much more and the process could drag on for several years while the rate of recovery is unknown.
The rearrangement, the say, is therefore a compromise that will allow creditors to own shares in the new company and have a chance of clawing back their losses through dividends.
“If the rearrangement is rejected, the expected dividend to concurrent creditors is unlikely to exceed a few cents in the Loti.”

The liquidators tout the rearrangement as a simple process that will allow creditors to prove their claims on the basis of the records held by the liquidators. They however warn that they cannot guarantee that the new company will make a profit because some business assumptions might be wrong.
On the disadvantages of the deal the liquidators say once the rearrangement is approved the creditors would have accepted that the MKM estate is insolvent and they can no longer have claims against it. They will only have rights in the new company. This means that the liquidators will not be able to launch legal proceedings against investors who made profits from the MKM schemes.

Staff Reporter

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