The Sunday Mail
AFRASIA Zimbabwe Holdings Limited (AZHL), which is frantically hunting for a significant cash injection to shore up its stuttering operations, is understood to have found a buyer for its micro-finance unit, MicroKing Finance.
The business was put on sale late last year.
AZHL, a subsidiary of Mauritius-based AfrAsia Bank Limited (ABL), is said to have sold Micro-King Finance for US$8 million.
Sources, however, would not identity the investor.
The purchase price at US$8 million is less than AZHL valuation of between US$10 million and US$15 million for the asset.
The group has embarked on several capital raising initiatives to breathe life into its struggling operations.
Plans are underway to raise US$15 million through a medium-term secured note.
A secured note is a type of loan backed by the borrower’s assets, which the debtor can forfeit upon default.
It has been marketed to local, regional and international investors and is expected to be drawn in tranches. The first tranche was expected to be drawn towards the end of January this year.
“We hear MicroKing Finance has now been bought but the company is tight-lipped on information pertaining to the identity of the buyer and how much exchanged hands but it is rumoured that they agreed on US$8 million.
“The funds are most likely going to be used for retrenchment as the group seeks to cut down on staff costs especially considering that more branches could be closed soon, with Westgate and Samora Machel branches being the targets,” said a source.
AZHL would neither confirm nor deny the transaction.
“The group will be in a position to announce to the market when decisions have been made and regulatory clearances secured,” said the group.
AZHL was also evasive when asked about further branch closures but had previously admitted more jobs would be lost as streamlining of operations continues.
“At the moment no branches are earmarked for closure (and) the market will be advised of any further developments in this regard.”
AfrAsia has already closed five branches in Ruwa, Chitungwiza, Newlands (Harare), Belmont (Bulawayo) and Victoria Falls, shedding some 90 jobs.
The former banking giant, carved from businessman Mr Nigel Chanakira’s Kingdom empire, is struggling to hold its own in a market plagued by low depositor confidence and a high loan default rate.
In November 2014, Reserve Bank of Zimbabwe Governor Dr John Mangudya said non-performing loans were almost US$800 million.
An NPL is when payments of interest and principal are past due date by at least 90 days or more.
Last year, the RBZ introduced the Zimbabwe Asset Management Corporation (Zamco) to resolve the scourge of NPLs.
So far, ZAMCO has acquired NPLs amounting to US$65 million using “other financing mechanisms provided for in its funding strategy”.
As a result of high NPLs and a biting liquidity crunch, AfrAsia is struggling to pay depositors on demand, and has adopted emergency measures such as limiting daily cash withdrawals to )US$50 per person and advising other depositors to use ZimSwitch-enabled point of sale devices or the Internet banking platform.
AZHL’s misfortunes are thought to be emanating from a US$21 million loan extended to Spiritage chief executive officer Mr Zachary Wazara.
The fallout between the businessman and the bank prompted the former to write a letter to the central bank accusing the latter of trying to conceal souring loans on its books.
The letter claimed the lender, through its special purpose vehicle, Lalela Trading, had subsequently entered into a debt-to-equity arrangement to acquire 80 percent of Valley Technologies – a subsidiary of Spiritage – after the mobile operator failed to settle its obligations to the bank.
Mr Wazara claims the bank undertook to eventually offload the shares to a Chinese company, but chose to foreclose. The feud is before the courts.
Despite having a core capital level of just US$6,01 million as at December 31, 2014, Dr Mangudya does not believe AZHL is in a dire state since the bank is negotiating with potential investors keen on securing equity in the institution.
In his January 2015 Monetary Policy Statement last week, Dr Mangudya said the country had three distressed banks – AZHL, Metbank and Tetrad Investment Bank – which were experiencing liquidity and solvency challenges.
The RBZ believes the three institutions are of “low systemic importance”, with market shares of 4,46 percent, 4,18 percent and 4,97 percent in terms of loans, assets and deposits as at December 31, 2014.
Capital Bank Limited and Interfin Banking Corporation were closed in the second half of 2014, while Allied Bank Limited’s banking licence was terminated on January 8, 2015 after voluntarily surrendering its licence.
This followed unsuccessful recapitalisation initiatives and resultant failure by the bank to trade out of solvency and liquidity challenges.
Legal processes to liquidate the bank have commenced.
The RBZ wants to ensure the financial sector is free of distressed banks by June 30, 2015.
