By Melody Chikono
The Zimbabwe Asset Management Corporation (Zamco) will in the coming year set up its own “proprietary portfolio” of properties acquired through debt-asset swap with US$97 million non-performing loans (NPLs) having been paid off by distressed borrowers to date.
Zamco stopped the acquisition of NPLs in Q1 2017 and commenced the resolution phase, the last leg of its life cycle in April 2017.
As at October 31 2017, Zamco had acquired NPLs amounting to US$965 million.
Prior to commencing the resolution stage, Zamco focussed on NPL acquisitions from banks and is now putting its thrust in intensifying collections in line with the already crafted individual account resolution strategies.
Zamco CE Cosmas Kanhai told businessdigest that recent developments on the domestic economic front point to renewed confidence which, going into the future, will likely result in improved and faster resolution of the acquired NPLs on the back of better performance by industry across the board.
“In addition, Zamco will be expected to have its own proprietary portfolio of properties acquired through debt-asset-swap and in the coming year we expect to start enhancing value on some of the properties eg land banks as well as converting some of the properties into cash,” he said.
Although Zamco uses a number of resolution methods, debt swaps have proven popular.
“… resolution of NPLs through debt-asset swaps has been the most common amongst the distressed borrowers with NPLs amounting to US$97 million having been paid off (using this resolution method) since the commencement of the resolution stage in April 2017. This is encouraging given that it’s seven months into the 10-year period.” he said.
Zamco has a lifespan of 10 years.
Kanhai said a number of borrowers have starting making repayments on their restructured loans and the debtors that have shown demonstrated commitment and capacity to repay loans have been restructured into long-term loans of up to 8 years.
He added although timelines inherent in the various resolutions would be different, all loans will be resolved within Zamco’s sunset period.
“The mere fact that the Corporation has various NPL resolution options at its disposal ensures that where one or the other option fails, there will be an eventual exit route. It is for this reason that Zamco only acquires NPLs which are backed by collateral security as this can be foreclosed on in the likely event of litigation. No loan acquired by Zamco will be automatically written off without pursuing all possible recovery options against the underlying business, its assets and its promoters in their individual capacities.
“In the absence of demonstrated willingness and/or capacity to service the debt within the agreed terms and conditions, Zamco is mandated to recover the loans through other means including sale of assets hypothecated as security or litigation through the courts,” he said.
Zamco has now gone for seven months into the resolution phase but has noted that current foreign currency shortages are posing a major challenge to turnaround efforts of some of the companies whose debts have been restructured by Zamco, as these companies require imported materials or consumables in their production processes and are being greatly affected.
Zamco has so far accredited a number of local and foreign financial advisory firms who have assisted it in finding investors who might be interested in distressed assets.