HomePoliticsTrust saved WMMI, Willdale from collapse

Trust saved WMMI, Willdale from collapse

Dumisani Muleya

TRUST Bank saved Willowvale Madza Motor Industries (WMMI) and Willdale Bricks from collapse through structured financial packages, it has been revealed.

erdana, Arial, Helvetica, sans-serif”>A Reserve Bank of Zimbabwe (RBZ) report on Trust compiled a few months ago when Trust first lurched into crisis says the troubled commercial bank saved the two crucial companies from going under.

This debunks the popular official position that the bank collapsed as a result of speculative invstments.

The report followed an investigation into the financial crisis which gripped Trust earlier this year. The investigators inspected Trust records, conducted interviews, and visited the Deeds Registry during the inquiry.

Before the probe, there were reports that Standard Chartered, Barclays and Stanbic banks had cancelled their business dealings with Trust because it was mired in a liquidity crisis.

It was alleged Trust got into problems in part because it had invested in a year’s supply of motor vehicles and bricks. However, an RBZ investigation concluded that Trust did not own cars and bricks but had salvaged WMMI and Willdale from the edge of folding up.

“In September 2001, WMMI was on the verge of closing down as it was failing to service its debts. The company approached a number of banks for financing,” the report said.

“Of the banks approached, Trust Bank responded positively and came up with a novel way of lending WMMI through a special purpose vehicle (SPV) – Trust Merchant Bank Nominees (TMB Nominees).”

A deal between WMMI and TMB Nominees called a tolling agreement was reached. The agreement, the report says, entailed TMB stepping into WMMI shoes to enhance the former’s security by owning the procurement, shipping, and production processes of the latter.

Trust facilitated a loan to TMB, which then had to secure foreign currency to pay the Japanese vehicle kits supplier, Itochu, to release parts to WMMI. The WMMI would then pay a fee to TMB and service its loan to Trust.

WMMI undertook to toll process motor vehicle kits into finished cars for, and on behalf of TMB Nominees. WMMI would act as an agent for TMB for the fulfillment of that mandate. TMB agreed to provide WMMI with motor kits and other necessary materials for the motor assembly company to do its work.

The motor vehicle kits, materials and cars would remain “the sole property of TMB”. But wages, salaries and administrative expenses related to the agreement will be from WMMI’s own resources. WMMI was to provide security to cover non-performance in the form of $1,9 billion guarantee by Motec Holdings and cession of all insurance cover on all stocks to TMB.

Production costs would be financed through the working capital agreement with Trust Bank. Security for the working capital, the report says, was the mortgage bond of $200 million over lot 1 of lot 6 in Willowvale being WMMI plant, guarantee of $200 million by Motec Holding and cash over.

Trust also helped Willdale in 2001 during its restructuring and refinancing of the company through the conversion of loan capital and accrued interest into ordinary share capital and injection of fresh funds through a rights issue. Trust were the underwriters of Willdale shares during its stock exchange listing.

* See also businessdigest.

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