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MKM hit by fresh crisis

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mkmMASERU –– Trouble is mounting for MKM as its creditors intensify pressure to get the company to settle its debts, the Sunday Express can reveal.
The beleaguered company hit troubled waters in November 2007 when the central bank stopped some of its business units alleging MKM was operating banking and insurance businesses without proper licences.
Since then MKM has been fighting court battles with the central bank which is making manoeuvres to liquidate the company in order to pay its stranded depositors
Apart from more than 150 000 depositors whose monies were trapped in the company when some of its operations were closed, MKM owes many other institutional creditors.
The Sunday Express can reveal that MKM is currently being sued by a local businessman, Uinis Kassim Abdullah, for a staggering M15 million-plus over a real estate deal that went wrong.
Abdullah sold a building in the Maseru West industrial area to MKM in 2007.
The building used to house Fahhida Cash & Carry which has since ceased operations.
Abdullah now operates Fahhida Supermarket at Thibella in Maseru.
The deal was sealed in August 2007.
The agreement was that of the M15 million purchase price MKM would pay a deposit of M3 million in Abdullah’s account at Standard Lesotho Bank.
That deposit was paid.
The balance was to be paid through 28 cheques, according to the agreement. The first cheque was supposed to be worth M532 000.
The other 27 cheques were supposed to be M500 000 each.
An interest of 15 percent per annum was also agreed.
The agreement also had a clause which stated that an interest rate of 18.5 percent per annum would be charged if the buyer breached the contract.
Sources say the deal went sour in November when MKM defaulted on the payment.
MKM was abruptly shut down by the central bank in November 2007.
It failed to pay the balance.
Abdullah said he could not comment because he was not feeling well.
“I suggest that we talk on Monday because I am currently at home resting,” Abdullah told the Sunday Express yesterday.
MKM company secretary Ts’eliso Manyeli said he could not comment because the matter was now before the courts.
“My hands are tied. I am not in a position to comment because the matter is already in court,” Manyeli said.
“It will not be proper to give any further details.”
If MKM loses the case it will have to pay around M20 million to Abdullah.
But there are already fears that the company might not be able to pay depositors.
PricewaterhouseCoopers, which was hired by the central bank to investigate the company, said of the M400 million paid for various schemes by the depositors almost M300 million could not be traced.
This means that 75 lisente of every loti invested by depositors is missing.
Although MKM has insisted that it is in a position to pay the depositors, sources at the company say most of its assets are in the form of buildings and cars.
They say even if MKM sells its assets it is highly unlikely that it will recover enough money to fully pay the depositors.
The problem, they say, is that cars are value-depreciating assets while buildings will be hard to sell because of the current recession.
Most of the buildings were bought at huge premiums with the hope that a boom in the market would create value for depositors.
This means that unless there is an investor willing to inject fresh capital into MKM the depositors are likely to get a small portion of the amount they invested.
The other big problem is that most of the company’s cars are listed in the name of Simon Thebe-ea-Khale, the founder and owner of MKM.
Financial experts say this lack of a clear distinction between MKM and Thebe-ea-Khale will create huge problems if the central bank decides to liquidate the company.
MKM is currently negotiating with the government to avoid liquidation.
Manyeli said he could not comment on that as well because he was not part of the talks.

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