There is a flurry of investors angling for shareholding in companies whose debts were taken over by the Zimbabwe Asset Management Company (Zamco), a special purpose vehicle created by the Reserve Bank of Zimbabwe to rescue debt ridden local entities and to hive off non-performing loans that were threatening the stability of the financial services sector.
Zamco acquired bad debts amounting to $1 billion from stressed companies that had the potential to be rehabilitated upon injection of fresh capital.
Some companies that benefited from Zamco’s rescue scheme include The Cotton Company of Zimbabwe, RioZim, Star Africa, Cairns, Hwange Colliery Company of Zimbabwe, Border Timbers and CSC.
In an interview with The Herald Business last week, Zamco chief executive Dr Cosmas Kanhai, said some agreements have been signed with a number of investors who are at various stages of conducting due diligence.
“Quite a number of investors have come on board; we have given them information they requested. Some are doing due diligence and others are close to signing share sale agreements,” said Dr Kanhai.
The investors have options, either to acquire the debt and convert it into equity or inject funds in form of preference shares or similar instruments, said Dr Kanhai.
He said some investors were requesting Zamco to first convert its debt into equity and dispose of the shareholding.
“It is not a one size fit it all,” he said. “But at the end of the day, Zamco should exit in all these companies. Some of the companies have already turned around and are now operating at optimal capacity utilisation.
Zamco, through a scheme of arrangement, recently converted its debt to equity in Zimbabwe Stock Exchange listed entity Star Africa, where it now holds a controlling stake of 58 percent of the company.
After the conversion, Zamco is now the biggest shareholder in the sugar processing firm followed by the National Social Security Authority (NSSA) at 31.63 percent.
Old Mutual Life Assurance of Zimbabwe and National Railways of Zimbabwe (NRZ), are also among the shareholders.
The principal amount of the debt converted now represents approximately 70 percent of the principal amount of the Secondary Scheme Debt.
Recently, our sister paper Business Weekly, reported that Surface Wilmer had made proposals to acquire 51 percent shareholding on The Cotton Company of Zimbabwe.
An Indian company has also expressed interest in buying shareholding in CAPS Pharmaceuticals.
Most companies Zamco rescued were in the manufacturing and the agriculture sector.