RP Capital rings alarm bells with me for several reasons.
First, there is only one reason to charter a Cayman Islands corporation, and that is to avoid taxes. While this may be appropriate for certain investors and in certain circumstances, it does not seem proper for a government agency attempting to ascertain the fair value of publicly owned assets to be sold to private "equity partner(s)", to trust, of all possible consultants, a company founded to avoid taxes.
Second, before anyone accuses me of tarring the RP Capital operation without knowing anything more about it than its corporate location, I find the background of the founders of the "Group" to be equally inappropriate to the task of accurately evaluating and securing full value to taxpayers of Zamtel privatisation. Rafael Berber, the Managing Partner, has his background in, get this, Structured Equity-Linked Derivatives! That's right, one of the principal architects of the current global mess (as head of Equity Structured Products Group for the Renaissance Group operating in Russia and CIS countries after serving as Head of Equity Trading at Merrill Lynch). His Partner, Petr Kellner, is the owner of PPF Group, a large Czech financial services firm, again specializing in credit and insurance.
The RP Capital Group describes itself as :
"....an alternative investment firm specialising in identifying superior intermediate and long-term investment opportunities on behalf of institutional investors and qualified high-net worth individuals. We have offices in the United Kingdom and United States.
"Our investment team has significant experience investing in regions such as Eastern Europe, the Middle East, Africa and Japan, using a wide variety of strategies. Of particular note is our unique merchant banking approach and our ability to structure a wide range of privately negotiated transactions."
Note that they do not specialize in rescuing ailing operations, nor in equity mergers between communications companies. They specialize in identifying opportunities for institutional investors and high-net worth individuals. Thus they possess no unique, desirable expertise to be applied to the Zamtel valuation which would explain the MoU signed by the Minister.
Third, we have as yet had no explanation as to how this lovely round figure of US$2 million was arrived at as an appropriate fee for the service of evaluating Zamtel's assets. Already there is indication that travel expenses and other operating costs will be bourn by the GRZ in addition to the quoted fee. How many experts are being contracted? How long would their work take? What does the hourly rate work out to be once all the costs are totaled?
The efforts by the government thus far to dismiss all questions about this deal as solely motivated by partisan politics is frankly insulting. I have never publicly endorsed any Zambian political party or candidate for office, yet I have been questioning Zamtel policy for years now. I am certainly not alone in this, and my concerns over this deal were raised by the Attorney General, not by the Post.
More questions and answers on Rafael Berber and RP Capital Group:
I don't have permission to reprint from Hedge Fund Alert, suffice it to say that they confirm that RPCG was in fact launching new hedge funds as recently as Feb 2007. By April 2008, the launch in question is described in passing as a non-contender for the EuroHedge Awards thusly, "RP Explorer, which had a very strong Sharpe and was also large enough to count, only failed to earn a nomination due to its 17% return failing to beat the median for emerging market equity funds in a very strong year for the group as a whole." There are also apparently equally underperforming regional brands, such as RP Japan Opportunities Fund, and RP Explorer Fund (Cyprus) Ltd. All of these funds show Merrill Lynch (Berber's former employer) as the principal distributor of shares.
Mr Berber also sits on the board of Atlas Estates Ltd., a service for which he has received in excess of EU$700,000 in stock grants according to their financial disclosure documents for 2006-7. The company reported an operating loss for the year, after reporting incomes slightly over 5 million euros and administrative expenses in excess of 16 million euros. Also on the board at Atlas Estates Ltd., is Mr. D. Saradhi Rajan, who is described as, "a Principal of RP Capital Group. Prior to joining RP, Mr Rajan had worked at Merrill Lynch in London and Hong Kong. Whilst in Hong Kong, he was responsible for the origination of corporate equity derivatives and private equity linked financing in South and South-East Asia. Prior to this, he worked as an investment banker at Lazard and Donaldson, Lufkin & Jenrette." Guess who bought 9.01% (as of June 11 2007) of Atlas Estates Ltd? Merrill Lynch.
Atlas Estates Ltd. "completed the acquisition of a number of corporate entities from the founder shareholders of the Group," including RP Explorer Master Fund and RP Partners Fund which received some 4.1M euros each in cash and stock in 2006. The documents go on to note that, "The RP Explorer Master Fund and RP Partners Fund are funds that are managed by R P Capital Group. The RP Capital Group is also the holder of 42.5% of the share capital of Atlas Management Company Limited."
According to reports from http://www.noalamina.org/, out of Argentina, which has tried hard to figure out who owns what in the global mining business, there may be some reason why these RP Capital people are familiar to Zambian Ministers after all. To quote a computer translation from the spanish original:
" RP Explorer Master Fund/RP MEF , is a London-based hedge fund, managed by RP Capital Partners Cayman Islands Limited . In May 2007, along with Glencore International AG , it set up an SPV "special purpose vehicle", along with three highly dubious private shareholders (Barry Steinmetz, the Gertner family and Dan Gertler), between them owning 72% of Nikanor PLC , in an attempt to buy out the company.
Nikanor PLC has a lease (though this is currently under review by the government of DRC Congo for alleged licence infringements) on what could be one of the he richest copper-cobalt deposits in Africa. The takeover failed - thanks to opposition by founding shareholders. ["Saved in the time of Nik?" London Calling, MAC website, 19/5/07].
A few months later, RP EMF stated that it was strongly opposed to a bid by a company called Camec (see Capital Group Companies ), to buy out Katanga Mining Limited - another suspect player in DR Congo, in which RP EMF had a major (15.72%) shareholding. RP EMF believed that "this unsolicited offer of Camec's shares undervalues the potential of Katanga and the quality of its assets"
The takeover was supported by a notorious 67-year-old Belgian national, George Forrest (of the Forrest Group ) – who himself held 24% of Katanga Mining [FT 8/11/2007].
The bid was probably also supported by Glencore, which had an exclusive contract to market the output from both Nikanor and Katanga's mines. An enlarged Katanga Mining could, according to the Financial Times, "become Africa's largest copper producer by 2011" - as well as "a future target for a big group such as the acquisitive Xstrata , which is 40 per cent-owned by Glencore." [FT ibid] (since reduced to 35%).
There it is, the missing link as to why these people would be trusted so by veteran cabinet ministers, they are the exact same chaps who cut all those wonderful mining deals we are all so grateful for now.
Yakima (Guest Blogger)
This piece was written as a response to Ministerial Statement : ZAMTEL and RP Capital.
Update (20/02/2009) : The Civil Society Petition to Acting Chief Justice Mambilima as reproduced in the Post.