Local firm sues CABS over lines of credit

Source: Local firm sues CABS over lines of credit – Sunday News Apr 9, 2017

Dumisani Nsingo, Senior Business Reporter
DEAT Capital, a local financial advisory firm, is suing the Central Africa Building Society (CABS) for allegedly failing to pay it its facilitation fee for sourcing lines of credit about three years ago.

According to a High Court letter stamped 6 April 2017 in possession of Sunday News , CABS issued Deat Capital with a formal mandate to raise the sum of $25 million trade finance line of credit for it on 22 February 2014.

The bank had stated that the purpose of the credit line was to meet the financial requirements of its corporate customers.

“It was a term of the mandate given by Defendant (CABS) to Plaintiff (Deat Capital) that should Plaintiff be successful in raising the $25 million on its behalf Plaintiff would be entitled to a fee of 0,5 percent of the amount raised.

“On the 16th of November 2014, the Plaintiff made an official request for $25 million credit line facility on behalf of the Defendant to the African Development Bank (ADB),” read part of the document.

It is further stated that ADB responded positively on the presentations made on behalf of CABS by Deat Capital leading to the approval of $25 million trade finance line of credit facility to the building society.

“Having successfully executed the mandate issued to it by the Defendant on the 22nd September 2014 and the Plaintiff entitled to payment of 0,5 percent of $25 million which is  $125 000 which amount notwithstanding repeated demand, Defendant has refused, or neglected or failed to pay,” reads part of the document.

Through its legal representatives, Mathonsi Ncube Law Chambers, Deat Capital is demanding payment of the $125 000 including a prescribed rate of interest, of five percent per annum from 20 April 2016 to date including an order for payment of the sum of
$125 000 as collection commission and costs of suit.

In its response in a letter dated 20 February 2017 CABS stated that it was going to pay the $125 000 upon assessing the effectiveness or the end of the facility.

“CABS’s position as regards the success fee as stated in the previous correspondence is that it can only be due and payable on declaration of effectiveness of the facility or upon draw down of the facility. These two conditions are still to be met. Once they are fulfilled, CABS will be glad to pay the 0,5 percent of the capital afforded to it by the African Development Bank,” reads part of the letter.