Golf estate developer Pinnacle Point applies for one of the first business rescues under the new Companies Act, subsidiary facing creditor
A FEW days before struggling golf estate developer Pinnacle Point Group applies for one of the first business rescues under the new Companies Act, one of its subsidiaries is facing an application for it to be wound up.
Eagle Creek Investments 74 attracted 24 investors in 2005 to a project to develop a golf estate on the banks of the Vaal Dam, to be known asLizard Point.
The investors claim they have seen no development in the project and they cannot account for their investment totalling R6,6m. They have gone to the South Gauteng High Court to ask that the company be wound up and a trustee to be appointed to take control of its affairs.
Pinnacle Point’s business rescue application is scheduled to be heard in the Western Cape High Court on Wednesday.
The lawyer for the 24 investors in the Lizard Point golf estate, Otto Krause, said on Friday theWestern Capeapplication would have no bearing on the application by his clients to have Pinnacle Point’s subsidiary wound up.
Mr Krause said this was because the business rescue application was instituted by the group, and not its subsidiaries.
If the business rescue application succeeds, all legal proceedings against Pinnacle Point will be suspended until the company emerges from business rescue. But if the application is dismissed, liquidation of Pinnacle Point Group seems a likely outcome.
Eagle Creek Investments 74 has indicated its intention to oppose the investors’ application. No date has yet been set to hear the matter.
The 24 investors said should Eagle Creek Investments 74 be wound up, an independent trustee would have to be appointed to take control of, and investigate, its affairs and perform all duties imposed by the Insolvency Act.
They said the appointed trustee would assist in ensuring that certain creditors were not improperly and unjustifiably preferred to others.
Eagle Creek Investments 74 announced in 2005 that it wanted to develop golf estates and purchased several properties for R11,5m. The bond finance from Investec was not sufficient to pay for the full acquisition of the properties and Eagle Creek advertised for potential investors.
Each individual investor was required to advance, on loan to Eagle Creek Investments 74, amounts ranging from R330000 to R500000. Investors were promised each loan would be secured by a debenture issued by Eagle Creek Investments 74 to the investor, upon the payment of the required amount.
In his application to the South Gauteng High Court, one of the investors, Andries Louw, said Eagle Creek had not commenced with the development of itsLizard Pointproject.
According to its website, the Lizard Point Golf Estate is to be developed on the banks of the Vaal Dam. It is advertised as “one of the biggest leisure developments in SA. The estate contains two golf courses, a links course (designed by Retief Goosen), and a parklands course. The estate will contain over 2700 residential units, two hotels, a waterfront and marina, shops, spa and hydro, and 4km of water frontage.”
Mr Louw said Eagle Creek received the investments made by the debenture holders in 2005.
Last year, Eagle Creek called a meeting to find solutions for debenture holders’ problems where they were advised that all their investments “have been spent, there is currently no cash left in the company”.
Mr Louw said in his affidavit that the company’s representatives told the debenture holders they did not know where the money went. He said in the most recent audited financial statements — for the year to February 29 2008 — R33m invested by debenture holders was reflected as a noncurrent liability on the balance sheet. No provision was made for the alleged indebtedness to Investec.
Mr Louw said investors were uncertain whether their bonds or the Investec bond had preference. The application for Pinnacle Point’s rescue was brought on the basis that the global slowdown in lending had resulted in the company being unable to borrow, which “paralysed” its ability to develop its properties.
Source: Business Day