Nedbank argues that subsequent market interest rate movements have affected the cashflows and close-out value of the Transnet swaps, resulting in a bitter dispute.
The breakdown of mediation processes between Nedbank and Transnet involving a bitter dispute over interest rate swaps is likely to kick off litigation against the South African lender which has vowed to defend itself in court.
The interest rate swap transactions between the two date to as far back as 2015 when Transnet raised loan financing at variable interest rates from Nedbank as well as other third-party funders to fund a locomotives procurement deal.
The floating interest rate risk on these loans was hedged with interest rate swaps.
Nedbank argues that subsequent market interest rate movements have affected the cashflows and close-out value of the Transnet swaps, resulting in a bitter dispute.
“Mediation between Nedbank and Transnet, in respect of interest rate swap transactions between the parties that took place in December 2015 and March 2016 has ended after it became apparent that there is no likelihood of resolving the matter amicably despite extensive engagements,” Nedbank said this week.
Business Report understands that Transnet is preparing to haul Nedbank for litigation. It believes that Nedbank has a case to answer while the lender says it cannot be held responsible for transactions it was not aware of at the time.
It appears that the stage has been set for litigation against Nedbank which had aought to resolve the dispute through mediation as a way of avoiding “potentially drawn-out and costly” litigation.
Transnet insists that the interest rate swaps by Nedbank were corrupt and tipped it into losses amounting to billions of rand.
Regiment Capital, a formerly Gupta linked company has also been drawn into the center of the conflict as it arranged and facilitated the loans that were advanced to Transnet by Nedbank and other lenders.
Said Nedbank: “The bank’s willingness to discuss any potential settlement in mediation has always been exclusively on the basis that any settlement should never be construed as being an admission of guilt or involvement in corruption on Nedbank’s part. As a matter of principle, Nedbank is not prepared to settle on any basis where this could be inferred.”
It vehemently rejected Nedbank attempts by Transnet to blame it “for its own governance failures”.
It said “it was not and could not have been aware of the apparent collusive relationships that the Regiments Group had forged with senior officials at Transnet, or the links that the Regiments Group apparently had” with the Guptas.
BUSINESS REPORT