BancABC reels from a US$11m exposure

Ferrochrome producer Zimasco, to which BancABC is exposed to the tune of US$11,7 million, could take five years to pay off its creditors, sources in the banking sector have revealed.

By Bernard Mpofu

In June, the High Court placed Zimasco under judicial management after the firm voluntarily applied for the order as global selling prices of ferrochrome continued on a downward slide.

Judicial management is a process aimed at assisting companies to manage their liabilities with all stakeholders in an equitable and orderly manner with the help of a court-appointed administrator. A judicial manager executes a turnaround plan to return the company to sustained viability in the shortest time possible.

The company’s application for judicial management was initially opposed by Zimasco’s bankers, who had raised concerns about their status as secured creditors. They also demanded an independent review of the turnaround plan.

However, after negotiations with the bankers, the judicial management process was seen as the best way forward for the ferrochrome producer.

Grant Thornton Camelsa managing partner Reggie Saruchera was appointed by the High Court as the provisional judicial manager for the company.

“Provisional judicial manager has provided his draft report which is proposing a scheme of arrangement wherein banks will be paid over 5,5 years, but subject to an interest moratorium effective 3 June 2016,” said a BancABC source privy to the latest developments.

Sources at BancABC said the special operations unit continued to apply assertive recovery strategies for the funds. The bank only collected US$185 000 from the company during the first half of the year.

The sources said the provisional judicial management (PJM) was targeting to have a scheme of arrangement in place by January 2 next year and then have the company out of judicial management thereafter.

“The PJM plan was to resuscitate closed furnaces and negotiate with government for a chrome ore export licence. A detailed business plan was reviewed by Deloitte ahead of the first creditors’ meeting which was held in August,” another source said.

Contacted for comment, BancABC managing director Joe Sibanda declined to discuss the issue, citing bank-client confidentiality.

“Insofar as your questions on Zimasco are concerned, I am sorry I cannot offer any comment as you are well aware that as a bank we are bound by confidentiality principles when it comes to banker-customer interactions with third parties,” Sibanda said.

Saruchera could not be reached for comment.

In June, the Zimbabwe Independent reported that prior to the granting of the provisional judicial management order, Zimasco and its major shareholder, Sinosteel Corporation of China, were working on a five-year business plan that is premised on various cost-reduction and productivity-enhancement strategies.