ZAMCO seeks to sell distressed loans

Published: 24 August 2017

THE Zimbabwe Asset Management Company (ZAMCO) has started to engage various investors interested in purchasing its distressed loan portfolio, chief executive Cosmas Kanhai has said.

ZAMCO, created in 2014 by the central bank as a vehicle to purchase non-performing loans from banks seeking to clean up their balance sheets, has acquired nearly $900 million in bad loans over the past three years.

When ZAMCO was created, non-performing loans had reached a post-dollarisation peak of 20,45 percent in September 2014.

The rate has since come down to about eight percent.

The engagement involves marketing some of the companies that ZAMCO has in its portfolio to investors including private equity funds, venture capital firms, asset management companies and pension funds.

Apart from mopping up toxic bank loans, ZAMCO has also bailed out firms such as Cottco and RioZim, which had been struggling under the burden of debt.

ZAMCO says it stopped taking up fresh bad loans in the first quarter of 2017.

In emailed responses to The Financial Gazette, Kanhai said ZAMCO was now reviewing acquired NPLs to ascertain the appropriate resolution strategy.

"One of the resolution method will be selling packaged NPLs to investors in distressed assets. We have started to engage various investors who are interested in distressed assets," he said.

Kanhai said selling of NPLs and investor engagements that are underway will not be done in phases, but will be an on-going exercise and would also be done in conjunction with other resolution methods.

ZAMCO uses a number of NPL resolution strategies namely plain loan restructuring, debt to equity conversion, debt asset swaps, selling distressed assets to investors and foreclosures.

In these first two phases of NPL acquisition, focus has been on NPLs whose underlying companies have prospects for turnaround if the loan is restructured.

In that regard, the major resolution strategies have been either plain loan restructuring or debt equity conversion.

Kanhai said the solution methods can be applied on a case by case basis.

"The resolution of NPLs is not a "one-size-fit-all. Each loan will have its own strategy which is appropriate to its unique circumstances and conditions. These resolution methods include loan restructuring, debt/asset swaps, debt-equity swaps, disposing NPLs to investors, and foreclosure," he said.

Going forward, Kanhai added, new NPLs will be created at a much reduced rate that will fall into the normal ranges and banking institutions should be in a position to manage those NPLs internally.
- fingaz

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