Union Bank Will Cut Ties to South African-Owned Company in Irvine
Union Bank said Thursday that it intends to sever its business dealings with an Orange County firm owned by one of South Africa’s largest conglomerates as soon as the firm pays off its loans.
The Los Angeles-based bank will end its relationship with Melles Griot, an Irvine laser and optics manufacturer, in an effort to comply with anti-apartheid investment laws as well as the bank’s own policy banning loans to South African companies, said Susan Murdy, a Union Bank spokeswoman.
The loans to Melles Griot had prompted Assemblywoman Maxine Waters (D-Los Angeles) to look into whether Union Bank was in violation of the California anti-apartheid investment law she sponsored a year ago.
On Thursday, Waters concluded that the bank had complied with the law, in part because it had decided to sever its relationship with Melles Griot, said Sandra Simpson-Fontaine, Waters’ chief of staff.
Arrangement Continued
Last month, The Times reported that Union Bank may have run afoul of federal and state anti-apartheid laws and a Los Angeles city ordinance by deciding to continue a loan arrangement with Melles Griot after the firm was acquired by a subsidiary of South African conglomerate Barlow Rand Ltd.
Typically, banks call in loans when a company is sold and make new loans to the new owner. But Union Bank, fearing that renewed loans would violate anti-apartheid laws, waived its right to call in its Melles Griot loans and allowed the new owner to assume the obligations.
As general banker for Melles Griot, Union Bank had provided funds to the company under a line of credit and a term loan before the company was acquired, Simpson-Fontaine said. The bank would not reveal the amount of the loans, but an employee who requested anonymity said the firm owes $7 million to $10 million.
Because of the acquisition, however, the banking relationship will end when the loans are paid off, and no new credit will be extended, Murdy said. She would not disclose any details about the loans, including when they will be paid.
“We had always planned to terminate the relationship after the sale of the company,” she said. “Our policy is not to continue doing business with a company that has a South African parent.”
Unless Necessary
Federal anti-apartheid laws do not ban loans to American firms owned by South African companies as long as the parent company does not benefit directly from the loans.
California law, in part, prohibits lenders from making such loans unless the loans are necessary to gain repayment of existing indebtedness.
The Los Angeles ordinance is similar to the state law, but city officials would require lenders to get out of such loans if possible, said Mark Fabiani, legal counsel to Mayor Tom Bradley. The bank’s status with the city is uncertain because the city has not yet received routine information from the bank about possible business contacts with South African firms.
A violation of state or city law could result in the withdrawal of deposits or investments with Union Bank and the refusal to deal with the bank again.
