DEPOSITORS will become major shareholders in CFX Bank after it announced a rescue plan this week for creditors to convert their debt into equity when it reopens.
The bank, which has been closed for the past 11 months, said it was working out a rescue package to recapitalise by offering depositors and creditors shares in exchange for their cash locked in the bank after it was shut down last December.
In a document titled the “Scheme Arrangement for Depositors of CFX Bank Ltd” released this week, the bank proposes to pay depositors up to $5 million with the balance converted into shares in the bank.
The scheme, if approved by the Reserve Bank of Zimbabwe (RBZ), means that former owners would significantly reduce their shareholding to give depositors a 59% stake after the conversion of their debt into equity.
“The scheme intends to achieve a restructuring and recapitalisation of CFXB so as to eliminate its negative equity position and return it to a solvent position,” said the document.
“It is proposed that all CFXB depositors be paid out $5 million under a cash settlement. A total of $42 billion will be paid out under the cash settlement. Some 39 000 depositors with balances of up to $5 million, representing 93%, will be completely paid out after the cash settlement.”
Depositors who turn their debt into equity will become shareholders in the listed holding company, CFX Financial Services, through a one-to-one share swap.
This means that for every share held in the bank, the depositor will get one share in CFX Financial Services. The value of the shares is yet to be decided. The shares would be tradable on the Zimbabwe Stock Exchange (ZSE) when CFX Financial Services’ suspension is lifted. Former major owners, Sean Maloney and Moses Chingwena who owned 25% and 5,72% of the bank respectively, will have their stake slashed to a joint 4%.
The RBZ, which is owed $83 billion by the bank, will also convert its debt into equity but the shares will be owned through Allied Financial Services, the company through which government owns 87% in the Zimbabwe Allied Banking Group (ZABG).
After the share swap, government’s Allied Financial Services will become the second major shareholder at 24%. A further $61,7 billion owed to CFX Merchant Bank Ltd and $14 billion owed to CFX Asset Management, which has since closed, will also be converted to ordinary equity in the commercial bank.
The scheme proposes that CFX Bank and CFXMB merge under one licence to operate the same way as Barclays Zimbabwe Ltd. Creditors and depositors in CFXMB will be paid in full before the merger. It proposes management changes and drastic streamlining of staff while the branch network will be reduced to five countrywide to focus on corporate clients.
There will be three branches in Harare at Century Towers, Eastlea (Executive Banking) and a small corporate branch at Tendeseka Park (Small Corporate Branch). Bulawayo and Kariba will have a branch each. Only five branches out of the more than 20 that it operated before the closure will reopen. The bank will retain about 20% of its initial workforce.
The scheme is however subject to approval by the Ministry of Finance, the RBZ, the ZSE and shareholders. CFX Bank and CFX Financial Services will also have to agree on valuation of the businesses and the share swap ratio. – Staff Writer.