THE battle for First Mutual Ltd (FML) has spilled into the High Court with Capital Alliance (Pvt) Ltd (CA) suing Renaissance Financial Holdings Ltd (RFHL) for buying shares from one of its cr
The lawsuit came as it emerged this week that RFHL had now amassed about 25,8% of FML shares as the financial group intensifies its battle to take over the insurance giant. Market sources this week said RFHL was still hunting for FML shares in the hope of buying a controlling stake.
CA is an investment company that FML management used to acquire a 20% stake when it demutualised in 2003.
The matter in the High Court arises from the fact that RFHL bought 112 562 814 FML shares which CA had used as security to borrow funds from ENG to finance their controversial management buy-in deal.
The shares were bought from the ENG’s liquidator by RFHL after CA failed to service its loan. ENG was among the seven financial institutions that loaned CA a total of $30 billion to finance its acquisition of 20% of FML.
Renaissance Merchant Bank Ltd (RMBL), a subsidiary of RFHL, was the security trustee under the Debenture Trust Deed.
CA used its FML shares as security for the loans. As part of the loan deal, CA had agreed to pay its creditors after every six months with dividends from its 20% stake in FML.
The investment company however failed to service its loans after FML sank into crisis and was suspended from the Zimbabwe Stock Exchange (ZSE).
FML also failed to release its results resulting in CA not receiving the dividend, which it had hoped to use to service its loans.
The drama started early this year when creditors demanded their money from CA at a time when it was in financial trouble because of FML’s suspension. RFHL however agreed to buy the shares from the seven financial companies including ENG’s 112 562 814 shares.
It is the ENG shares that form the crux of CA’s case whose papers were lodged with the High Court last week.
CA claims in their court papers that RFHL should not have acquired the ENG shares because it had made a commitment to pay for them.
The papers cite RMBL (first respondent), RFHL (second respondent) and Renaissance Security Nominees (third respondent).
New Africa Securities (Pvt) are listed as the fourth respondent while First Transfer Secretaries (Pvt) are the fifth respondent.
In their application, CA are demanding “the transfer by the first respondent and/or second respondent to third and fourth respondents of 112 562 814 ordinary shares (“the shares”) in the share capital of First Mutual Ltd (“FML”) which shares were previously held by applicant (Capital Alliance) under share certificate No 123235 be and is hereby declared unlawful and void.”
CA argues that it had already made a commitment to pay for the ENG shares through the tender of $15,6 billion to RFHL on November 3. They are also seeking to nullify RFHL’s deal with ENG liquidator who sold the shares.
RFHL are however arguing that CA did not have the money to pay for the ENG shares as they were in financial problems.
“I wish to bring this honourable court’s attention to the fact that apart from shares held in First Mutual Ltd (being residual shares referred to in the founding affidavit), the applicant (Capital Alliance) does not have any cash resources,” said RFHL in their opposing papers.
“It can only raise cash through the disposal of these shares which disposals are barred under the Debenture Trust Deed in circumstances where there is non-settlement of debenture holders.”
RFHL argue that there is a settlement agreement reached at a meeting at Renaissance’s offices on September 2 (0830) where CA authorised the creditors to take over 16% of the CA’s 20% shareholding in FML.
They say that the ENG shares were part of the 16%, which CA had agreed to surrender. Confidential papers in possession of businessdigest show that CA had agreed at two separate meetings on August 17 and September 2 this year to surrender 16% of FML shares.
The meeting was held at RFHL’s offices on August 17, at 1430 hours.
Douglas Hoto, Noel Biti and Pelagia Kafesu represented CA as directors while Patterson Timba, Dunmore Kundishora and Pamela Jones represented RFHL.
The meeting resolved that: “The Settlement Offer represented by CA and accepted by RFHL, splits CA’s 20% shareholding in First Mutual Ltd as 16% and 4% for the CA financiers and CA respectively.”
RFHL has also made a counter move by demanding in their court papers that CA prove to the court that they are able to pay legal costs in the event that they lose the case.