Thread: More "Debt Vultures" - Hong Kong Court Upholds Debt Claim

Some background to the above story:

7, the Congolese tax authority, the Direction Générale des Impôts (DGI), announced that the Groupement pour le Traitement du Terril de Lubumbashi (GTL) was not in a position to “honour a tax liability on profits for fiscal 2009 on 2008 revenues”, representing 6.56 billion Congolese francs or about USD 10 million. GTL’s shareholders include OM Group with 55%, Forrest Group with 25% and Gecamines with 20%. The DGI referred to a “garnishment order” taken out with respect to GTL’s accounts as being the cause of the difficulty, without saying who had taken it out.

However, GTL’s financial health is not in question. Contacted by Africa Mining Intelligence, Forrest Group said that the move was in fact an unsuccessful attempt by the American vulture fund FG Hemisphere Associate LLC to gain access to cash that should in normal circumstances be paid to Gecamines and the Congolese government. According to GFI spokesman Henry de Harenne : «There was blocking (of funds) around the month of March but this is not in any way linked to any inability on GTL’s part to pay its taxes.» In addition, GTL was finally able to pay off its tax liability to the Congolese government. GTL generates significant financial income for Gecamines. Indeed, GTL and its subsidiary STL (Société pour le Traitement du Terril de Lubumbashi) represent the state-owned company’s main source of revenue, around USD 100 million/year, which is roughly half its annual income.

FG Hemisphere took on the GTL consortium after its attempt before a Hong Kong court in December 2008 to gain access to entry fees paid by China Railway Group to Kinshasa as part of a deal exchanging infrastructure for commodities. The vulture fund is trying all possible means to lay its hands on Congolese cash since it bought a USD 104 million loan taken out in the 1980s by the Société Nationale d’Electricité Congolaise (SNEL), the Congo’s national electricity company, from the Bosnian company Energoinvest.






What will the American commercial lender FG Hemisphere Associates LLC do next? Last year, the vulture fund tried to recover a credit of USD 104 million from the Democratic Republic of Congo in the High Court of Hong Kong by targeting Chinese funds to be used for deals concluded between Kinshasa and Beijing whereby China supplies infrastructure projects in exchange for mining concessions.

But the Congolese government won at a hearing on December 12. The High Court of Hong Kong said it could not rule in the case since it had no jurisdiction in the DRC. But FG Hemisphere Associates could nevertheless appeal this decision. The USD 104 million in question relate to a debt contracted in the 1980s by the Société Nationale d’Electricité Congolaise (SNEL) bought by the vulture fund from the Bosnian company Energoinvest. Indeed, FG Hemisphere had obtained a favourable ruling in 2007 from the U.S. Court of Appeals for the District of Columbia. In May, FG Hemisphere asked the Hong Kong court to grant it the deduction of the USD 104 m from a sum of USD 221 million paid by China Railway Group as an entry fee to Kinshasa as part of the infrastructure-for-mining concessions deal.

China Railway Group may not be the only ones to run up against the vulture fund. In fact, some new partners recently bought into the Sino-Congolese joint venture’s capital: China Metallurgical Group Corporation and a new Congolese state company called Congo Simco, which specialises in real estate and which is taking the 12% stake that Gilbert Kalamba Banika owns in the venture. The joint venture is now owned 43% by China Railways Group, 25% by Sinohydro, 20% by Gecamines and 12% by Congo Simco.