Zamco transforms sickly firms
THE establishment of the Zimbabwe Asset Management Company (Zamco) is bearing fruit, as some companies that were staring collapse due to choking debt are back on their feet and largely doing well considering their rising production capacity and employment levels, Reserve Bank of Zimbabwe Governor Dr John Mangudya has said.
This comes as Zamco restructured the companies’ balance sheets through conversion of debt to equity.
Critically, Zamco has also resolved NPLs acquired from banks totalling $251,46 million, representing a resolution rate of 22 percent.
Some clients paid for their loans through cash, while others used properties.
Zamco, a special purpose vehicle created by the RBZ in 2014 to hive off NPLs that were burdening most companies, acquired 1 160 NPLs from banks with a book value of $1,13 billion as at September 30 last year.
No new NPLs have been acquired since then and beneficiary companies, including starafrica corporation, RioZim Limited, Stuttafords Removals and Cairns Foods Limited, are now enjoying a new lease of life.
Dr Mangudya was speaking during a hearing by Parliament’s Public Accounts Committee (PAC) on Monday.
“The measures that Zamco is implementing to assist companies to turn around are bearing fruit,” he said. “These measures include plain loan restructuring whereby Zamco extends loan repayment periods and reduces interest rates, as well as debt/asset swaps where loan obligors settle their debts using properties.
“In addition, Zamco has assisted some companies with balance sheet restructuring through conversion of the debt into equity. These measures have resulted in companies experiencing significant cash savings, which they then channel to operations.
“Some of the companies that were on the verge of collapse because of debt and spiralling finance costs which have been assisted by Zamco through the NPL resolution processes are Cotton Company of Zimbabwe, Radar, Border Timbers, Windmill, Ariston, Africom, Cairns, The Wattle Company, Turnall, Chemplex Corporation, Willowvale Motor Industries and David Whitehead.”
Dr Mangudya said Zamco saved a number of small to medium companies from imminent collapse through “the relief of plain restructuring”.
In order to fund the purchase of NPLs, Government guaranteed the issuance of Treasury Bills and bonds worth US$1 billion.
The TBs are loans to Zamco and capitalisation, implying it is not Government that will pay the coupons when due.
“As at 31 December 2018, Zamco had fully resolved NPLs totalling $251,46 million, which represents a resolution rate of 22 percent since the beginning of the resolution phase in April 2017,” said Dr Mangudya.
“A number of the clients paid for the loans through cash and properties.”
Dr Mangudya said out of the $251,46 million NPLs fully resolved, Zamco received cash and other assets amounting to $258,49 million, representing a recovery rate of 103 percent, indicating that the corporation is maximising value upon resolution of NPLs.