ZAMCO to dispose debt assumption-linked equity

ZAMCO to dispose debt assumption-linked equity
Published: 05 July 2018
THE Zimbabwe Asset Management Company (ZAMCO) - a Reserve Bank of Zimbabwe debt assumption vehicle - has said it will not hold equity for long periods in companies it assumed shareholding through debt to equity conversions.

By December 2017, ZAMCO had cumulatively assumed debts and non-performing loans amounting to $987 million from different companies from across the economy.

"Apart from disposing the debt to investors who specialise in distressed debt, ZAMCO is also looking for opportunities where investors can come and inject capital (equity) in the companies, which would give them chances for turnaround.

"There are many foreign and local investors who are interested in either buying the debt or undertake equity investments and these investors are at various stages of conducting due diligence for the companies and areas of their interest," ZAMCO chief executive officer Cosmas Kanhai said in an interview.

In April this year ZAMCO became the largest shareholder in sugar manufacturer Star Africa Corporation arising from the conversion of the company's more than $32 million worth of non-performing loans into ordinary equity.

"Unlike some other investors, ZAMCO does not have an intention to hold equity in other companies for very long periods. During the period that ZAMCO will be holding such ordinary equity, the objective is turning around the company, hence the Corporation will look for feasible exit strategies including disposal of the shareholding to any interested investor," Kanhai said.

Starafrica's debt to several financial institutions was snapped by ZAMCO following an agreed scheme of arrangement.

BancABC was owed $16 million, while the Afreximbank was owed $11 million.

Other lenders were the Industrial Development Bank, Stanbic Bank Zambia and the defunct Kingdom Bank with each being owed $1,8 million, $600 000 and $2,6 million respectively.

Apart from Star Africa and several financial institutions, ZAMCO also bailed out resource group RioZim Limited when it assumed $30,2 million of its $40 million, which has weighed down the group's working capital position for years.

According to Kanhai, for other companies whose debts have been acquired, ZAMCO is now implementing various methods to ensure that it collects and recovers from them.

"Some of the resolution options include restructured loans implying extending the loan repayment period and reducing interest rates for those companies that are generating cash flows to repay their loans," he said.

Other options include debt asset/swaps - where borrowers repay a portion or the full amount of their loans using properties held as collateral and ZAMCO will then convert the properties into cash by disposing them.

In some instances, ZAMCO can convert the debt into preference shares or ordinary shares of the company or it may sell the NPLs to investors at an agreed discount.

Kanhai said on negotiated settlement this is where ZAMCO agrees for full and final cash settlement of the loan at a discount from the outstanding loan amount.

For borrowers who do not have capacity to repay their loans and who are also unwilling to enter into debt/asset swap arrangements, ZAMCO will foreclose on collateral as well as recover from any guarantors of the loan.

- fingaz
Tags: ZAMCO,


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