Nedbank did not “pocket” R780 million
Published - 17 May 2019
Nedbank did not “pocket” R780 million, as suggested by City Press, from its participation in the financing of a portion of Transnet’s acquisition of 1 064 locomotives and subsequent interest rate hedges.
The inference that may arise from Transnet’s testimony at the Zondo Commission that Nedbank made R780 million after fixing the interest rate, subsequent to granting the loan, is simply incorrect. It is important to note that the figure did not accrue to Nedbank.
The Nedbank loan and swap transactions relating to the 1 064 locomotives were commercially sound and the return on equity - a key measure of bank profitability - earned by Nedbank on the series of transactions was fair, reasonable and appropriate at 15,5% over the life of the transactions. This is below the overall published return on equity of Nedbank of 16,8% as at December 2018.
Being part of the financing arrangements, and subsequent hedging, is hardly unusual and is standard industry practice. No adverse conclusion can thus be drawn from Nedbank’s participation in both the lending and interest rate swap arrangements.
In executing the interest rate swaps, Nedbank followed due process and obtained confirmation of the rates directly from mandated individual(s) at Transnet.
These trades form part of a structure and the all-in fixed swap rates were provided to Nedbank by Regiments Capital, the formally mandated advisor for Transnet, and were confirmed and settled directly by Transnet. This was documented using standard ISDA legal documentation. The decision on whether to select fixed or floating rates was made by the client and their advisor, not by Nedbank as executor of the transaction.
No fee was paid, at any time, by Nedbank to the Regiments Group with respect to the interest rate swaps used to hedge Transnet’s interest rate risk exposure emanating from its financing arrangements. Nedbank totally refutes any alleged “partnership” or “collusion” with Regiments to extract money from Transnet.
It is now becoming increasingly clear from Transnet’s evidence at the Zondo Commission that some of its key officials and decision-makers were compromised by state capture, resulting in the breakdown of internal Transnet processes.
Nedbank continues to engage with the Zondo Commission and Transnet and its related entities that were involved in the interest rate swaps.
