Paramount Aerospace Holdings, a subsidiary of Paramount Group, has made an application for the commencement of business rescue proceedings for the Aerospace Development Corporation (ADC), which is developing the Ahrlac aircraft.
Paramount Aerospace Holdings and the Potgieter family each have 50 percent stakes in the Aerospace Development Corporation (formerly Ahrlac Holdings). On 28 February Paramount made an application to the North Gauteng High Court for the company to be granted Business Rescue status.
“Paramount Aerospace has been engaged for more than five months in intense negotiations between the shareholders of ADC, in order to ensure the sustainability of the company; the Board has reached deadlock. Despite Paramount’s best efforts to resolve the deadlock and to inject new capital into the business, the shareholders unfortunately could not reach an agreement,” Paramount said in a statement on Monday.
According to Philip Coetzer, the lawyer for the Potgieters, the Ahrlac factory has been shut down and around 140 employees sent home. They did not receive January or February salaries, according to Rapport. The company has invested heavily in machine tools to make many of its own parts as part of a policy of self-sufficiency in its entire design and manufacturing process.
According to Rapport, the conflict between the Potgieters and Paramount stems from alleged misappropriation of intellectual property and funding obligations from Paramount.
Coetzer said he would challenge Paramount’s business rescue submission on the basis that that this has been brought to court as a matter of “urgency”. Coetzer said granting the business rescue on the basis of urgency would be an abuse of rules. He said he expected the application to halt business rescue would appear before court on Thursday this week.
Coetzer said he would also be calling for an investigation into what he termed “unlawful alienation” of intellectual property from Ahrlac. A Paramount lawyer has denied this, according to Rapport.
Coetzer has also alleged that that Paramount has violated the shareholders agreement with the Potgieters. He says under the agreement, Paramount has an obligation to provide cash to Ahrlac in order to finalise the product.
Paramount said that “over the past nine years, Paramount Aerospace and its affiliated companies have significantly invested their own capital, as well as supported and underwritten the raising of third party funding to the tune of hundreds of millions of Rands. This was done in support of what is a truly unique global aerospace project and we remain dedicated to supporting the programme and seeing it through to fruition.”
Paramount added that it “fully supports the company and we believe very strongly in the programme. We are therefore fully committed to the Business Rescue process. The Business Rescue Practitioner will be supported to raise immediate funding so that the employees and creditors of ADC can be paid.”
Paramount, one of SA’s largest defence companies, is owned by the Ichikowitz family and has a large presence in a number of technology areas and markets. It has supplied a number of countries with its Mbombe infantry fighting vehicles, amongst others, and last month signed a deal to sell a new version, the Mbombe 4, to the United Arab Emirates.
As it is privately owned, little is known about Paramount’s revenue breakdown.
The Advanced, High Performance, Reconnaissance Light Aircraft (Ahrlac) is a push propeller aircraft, designed as a lower-cost alternative to unmanned aircraft for the reconnaissance and attack roles. The aircraft first flew in 2014. Paramount Group is the launch customer of the aircraft and placed a number of orders for the aircraft. Despite having paid in full for the aircraft, Paramount says it is still awaiting delivery.
The programme manager of Ahrlac is Paul Potgieter Jr, whose father Dr Paul Potgieter was Managing Director of Aerosud and headed the Rooivalk attack helicopter development team in the 1980s.