Creditors and depositors will take over Tetrad Investment Bank (TIB) in a debt for equity swap, which has to be approved at crucial meetings next month.
BY BUSINESS REPORTER
This in a last ditch rescue bid for the institution which has been under provisional liquidation since January 29, 2015. The institution has struggled to find a suitor due to its weak balance sheet.
The scheme has to be approved at creditors and depositors meetings in Harare on April 6 and Bulawayo on April 7.
The bank owes depositors and creditors a combined $67 372 926.
In a circular to depositors, creditors and shareholders, scheme meeting chairman, Andrew Mugandiwa, said depositors and creditors would get a cash payment of $1 000 or any such amount if the balance is below that and additional cash of $0,50 in a dollar for the portion of creditor balance in the range of $1 001 to $10 000. The other $0,50 in a dollar for the portion between $1 001 and $10 000 shall be written off to the reserves of the bank. The balance after cash payments to creditors and write off shall be converted into ordinary shares at a par value of $0,01 and a premium of $0,09 per share. A total of 551 020 244 new shares will be issued while old shares to existing shareholders will be cancelled.
The cash payment has a budget of $4,1 million made up of internal cash resources ($3 million) and $1,12 million from the Deposit Protection Corporation (DPC). Tetrad will repay the money advanced by DPC over a three-year period.
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Mugandiwa said the bank was not attractive to investors under its current state and that several capitalisation initiatives taken by the directors and shareholders have failed to yield the desired results.
“Creditors and depositors of the bank have suffered for too long and it would be important to bring closure to the issue. Furthermore as each day passes with the bank ion its current state, further losses in value are incurred,” he said adding that it was hoped the proposed scheme would at least preserve value for depositors and creditors in the prevailing harsh economic environment.
Mugandiwa said the implementation of the scheme would make the bank more attractive to potential investors.
“The bank’s moves from a deficit from a deficit of $33,5 million to a positive $25,6 million in accounting terms. The regulatory capital as at September 30 2016 moves from a deficit of $35,2 million to a positive capital of $23,9 million which falls just below the regulatory capital of $25 million,” he said.
“The capital gap can be covered by collections from fully provided for advances. The bank would, however, still need capital injection for working capital purposes.”
Mugandiwa said the other option available would be to liquidate the bank and get lower amounts, if creditors and shareholders do not approve the scheme.
“Based on our preliminary calculations, a liquidation dividend of $0,21 in a dollar would be payable to depositors and creditors. This amount is likely to be even lower if the prevailing macro-economic conditions do not improve,” he said.
Tetrad Investment Bank Limited is owned 100% by Plus Financial Holdings Limited, which in turn is owned by Tetrad Holdings. As at January 31 2015, the top 20 shareholders of Tetrad Holdings owned 89% of the bank indirectly and comprise investment companies, pension funds and trusts.
