After bank announced this week that it was pulling out of mediation over interest rate swap agreements related to the purchase of locomotives. From Moneyweb.
Transnet says it is preparing legal action against Nedbank, which earlier this week pulled out of mediation talks aimed at resolving a series of contested interest rate swaps that were the subject of extensive testimony before the Zondo state capture inquiry.
Transnet says Nedbank has a case to answer over its role in a series of interest rate swaps arranged by Gupta-aligned Regiments Capital in 2015 and 2016 as part of a plan to fix interest rates on loans for the acquisition of 1 064 locomotives by Transnet. The Zondo Commission heard testimony that the timing of the swaps and the manner in which they were executed appear to have been done to generate fees for Regiments and Nedbank.
Nedbank has rebuffed media claims that it pocketed R780 million from the transaction and says its 15.5% return on equity earned over the life of the deals was fair, reasonable, and appropriate. It says it pulled out of mediation talks after failing to reach an agreement with Transnet, which it says had tried to pass the blame for its own governance lapses.
The Zondo Commission heard testimony that Transnet had been severely prejudiced by the interest rate swaps, which appeared to have been done for the benefit of generating fees for Regiments and Nedbank. Regiments was the executing agent on the transactions, though Zondo found “no special features to the transaction that justified the use of a service provider to execute the swaps”.
Read/Listen: Nedbank in the spotlight for alleged corruption
Nedbank played no part in the negotiation of the fees paid to Regiments, according to testimony before the Zondo Commission, which recommended the interest rate swap matter be further investigated. Nedbank further says it paid no commissions to Regiments.
Nedbank to defend litigation
Nedbank said it would strongly defend any planned litigation by Transnet and is “satisfied that Nedbank internal governance procedures were followed in respect of the transactions and that there is no evidence of any Nedbank staff dishonesty, corruption or collusion.”
In a statement issued on Tuesday, Nedbank says it acted as the credit intermediary between Transnet and its own pension fund and says the swaps served their intended purpose as highly effective hedges against interest rate movements.
Subsequent interest rate movements, which had a negative effect on Transnet cash flows and close-out values, could not have been predicted at the time.
To which Transnet replied: “Transnet does not agree with the contents of Nedbank’s statement and is of the view that there is a case for Nedbank to answer to, obliging Transnet to take positive steps to have this matter heard in court. Given the confidentiality constraints attached to the mediation process, Transnet makes no further comment in this regard.
“Legal proceedings will imminently be instituted by Transnet against Nedbank, which will set forth the basis for Transnet’s case.”
