Zamco targets year-end for loans buy-out
THE Zimbabwe Asset Management Company (Zamco) says it would have mopped up all the Non-Performing Loans amounting to $750 million in the banking sector by the end of the year.
The asset management company was established by the Reserve Bank of Zimbabwe in 2014 to buy out Non-Performing Loans (NPLs) from commercial banks collaterised loan book.
Zamco, which started absorbing NPLs last year, has as at June 30, 2016, acquired $528 million from the banking sector.
Zamco chief executive officer Dr Cosmas Kanhai said once the acquisition of NPLs is completed his firm would then come up with various resolution methods to address the problems emanating from NPLs.
He reiterated that the asset management company is not absorbing loans that were recklessly issued without due diligence.
“So far as at June 30, 2016, we had acquired NPLs amounting to $528 million from the banking sector and some of these underlying borrowers are now starting to benefit from the restructuring that we’re undertaking,” said Dr Kanhai while addressing delegates during a breakfast meeting organised by the Directors Protection Council of Zimbabwe in Bulawayo yesterday.
“Some of the loans we’re restructuring into long term loans, others we’re converting into preference shares and also converting into equity shares depending on the business model of those companies. We expect to conclude the acquisition phase by end of December this year.”
After acquisition of the NPLs, Dr Kanhai said, debt equity conversion is among the various resolutions they were using to address NPLs. He reiterated that Zamco was buying out NPLs with a focus to clean up the financial services’ sector balance sheets so that the institutions can confidently trade and lend.
Dr Kanhai said the asset management corporation was not only looking at benefiting the banking sector but also focused on assisting the borrowers.
“We’re not only looking at benefiting the banking sector by hiving off the toxic assets but we’re also looking at the underlying companies (borrowers) by assisting them where we see there is scope for that company to turn around if it’s assisted in terms of restructuring the loan.
“Besides acting with the companies as well, there are some companies that are under judicial management, we also work hand-in-hand with judicial managers when they look at coming up with a scheme of arrangement where we can see how best we can restructure the legacy debt that is inherent in the banking sector,” he said.
Zamco’s strategy for funding NPLs comprises a number of options that include Government funding through long-term debt instruments approved in the 2015 National Budget statement.
At present, he said, companies do not come directly to Zamco on matters related to NPLs.“One may ask how do I make my loan that I hold with a bank come to Zamco, currently unlike other countries like Nigeria, that have got similar organisations that have got a law that compels banks to send all NPLs to Zamco, in Zimbabwe it’s a willing buyer willing seller. So as a company you don’t come directly to us.
“You approach your bank and inquire whether your bank is willing to sell the NPL to Zamco because it’s a willing buyer-willing seller,” he said.
The Central Bank has pointed out that some of the bank failures experienced in the recent past were due to NPLs.
The monetary authorities are on record saying although about six banks were closed in the past couple of years, since 2009 the financial services sector has remained generally safe and sound.