Monday, December 6, 2021

CMB multimillion Pula investment in Yarona Media Holdings ends in tears

The controversial planned P 17 million investment by the embattled Capital Management Botswana (CMB) into Yarona Media Holdings has bombed into a legal dispute that is currently before the courts.

Yarona Media Holding is the parent company that owns Yarona FM, Horizon Advertising and the Echo newspaper.

According to the CMB Statutory Manager the Botswana Public Officers Pension Fund (BPOPF) declined a P77 million drawdown by CMB which the investment company planned to invest in Yarona Media Holdings and Lobatse Clay Works. “The dispute escalated from there to litigation which is pending in the courts and by way of arbitration.”

Indications are that the dispute between CMB and BPOPF over the planned investment in Yarona Media Group has branched off into a number of pending law suits.

Yarona Media Group has threatened to sue CMB, BOP and CMB1 for failing to disburse the whole amount as promised in three agreements signed with the entities.

So far only P13 million has been disbursed to Yarona Media Group and Statutory Manager states in his report that “I hold the opinion that the funds paid to YMD are unlikely to be recoverable in the event of a dispute.”

He goes further to raise questions about the prudence of CMB’s investment in Yarona Media Group. The historical financial performance of Yarona Media Holdings “was said to be tepid due to the nature of the company. However the introduction of a financial expert (one MK Lekaukau) was proposed to be a game changer on the basis that he brings a financial dynamic to the group which was not previously there. The forward looking performance was said to support the proposed transaction and the valuation of P 56 million represented an EBITDA margin of over 2x earnings “states the Statutory Manager. EBITDA is a

A company’s earnings before interest, taxes, depreciation, and amortization (commonly abbreviated EBITDA, is an accounting measure calculated using a company’s net earnings, before interest expenses, taxes, depreciation, and amortization are subtracted, as a proxy for a company’s current operating profitability (i.e., how much profit it makes with its present assets and its operations on the products it produces and sells, as well as providing a proxy for cash flow). The P17 million that CMB wanted to invest in YMH was to be used to reduce interest and rental costs. “It is not clear from the minutes whether a financial valuation was presented to the investment committee” states the report.

CMB then issued a drawdown notice dated September 2017 for P77 million. P17 million was to acquire a 30% shareholding in YMH and the balance to acquire 80% in Lobatse Clay Works. The BPOPF refused to fund the draw down notice. On 22nd September 2017 (two days after issuing a drawdown notice to BOP ÔÇô later refused) CMB and YMH entered into three agreements: A subscription agreement between YMH and BOP (represented by Tim Marsland) in terms of which BOP would subscribe for 30% of the shareholding in YMH for P17 million. BOP invested money for the BPOPF.

YMH then entered into another subscription agreement with CMBF1 (which represented Bona Life) in terms of which CMBF1 loaned YMH P13 million in consideration of a Note, to be issued to CMBF1. This was ostensibly in respect of an unsecured P50 million Fixed Rate Promissory Note Programme.

Then there was a shareholders’ agreement (for YMH participation) between BOP represented by Marsland and the Special Purpose Vehicle (SPV) of assorted individuals viz. Dumilano Lopang, Benson Madisa, Neo Patrick Nwako and Moatlhodi Lekaukau.

A sum of P 5 million was transferred from the CMBF1 account to YMH on 3rd July 2017. On 28th August 2017 another sum of P 8 million was transferred from the CMBF1 bank account to YMH. The statutory manager states that, “this is surprising. BPOPF had not yet been formally approached to expand the BOP fund by the anticipated P380 million and these payments were made in advance of both that unheralded event as well as the later request for drawdown. Could the Marsland apparatus be investing independently from its BOP mandate?”

On March 2018 Rantao Kewagamang Attorneys, acting for YMH issued a letter of demand to CMB and CMBF1 for payment of P18 million in respect of a drawdown for promissory notes dated 14th October 2017 and the same day issued a letter of demand to BOP and CMB of P17 million for the subscription agreement. The statutory manager states that, “it is clear that the funds paid to YMH were on the basis that they represented part of an investment by the BOP in both the equity and promissory notes. It is further reasonably clear that once the BPOPF refused to fund the requested drawdown, CMB switched entities in respect of the promissory note programme from BOP to CMBF1. This is clear evidence of a Marsland’s approach to investments undertaken by CMB. One asks again, if it was CMB’s intention to fund this investment for BOP’s benefit, where the funds came from for the P 13 million paid out to YMH?

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