Creditors and depositors will take over Tetrad Investment Bank (TIB) after agreeing to a debt for equity swap and partial cash payment deal at two crucial meetings held early this month.
BY BUSINESS REPORTER
The meetings were held on April 6 and 7 in Harare and Bulawayo respectively. The bank has been under provisional judicial management since July 2015. In 2014, the bank was ordered to stop accepting deposits after it failed to pay for deposits.
In an update last week, the provisional judicial manager said the scheme of arrangement which will result in the debt for equity conversion and partial cash payment had been approved by creditors and members.
“With 100% approval by members and 88,09% approval by creditors, the scheme as detailed in a circular published as amended at the scheme meetings is carried through. For the scheme to proceed, it required approval by 75% of members present in person or by proxy at the scheme meetings,” the provisional judicial manager said.
TIB owes depositors and creditors a combined $67 372 926.
According to the scheme, 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.
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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.
In a notice last month, scheme chairperson Andrew Mugandiwa said TIB was not attractive to investors under its current state and that several capitalisation initiatives taken by the directors and shareholders have failed to yield 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 in its current state, further losses in value are incurred,” he said then.
The implementation of the scheme would result in the bank with a capital position of $25,6 million from a deficit of $33,5 million.
This will result in the regulatory capital as at September 30, 2016 moving 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.
If the plan had been disapproved, the institution would have headed for liquidation. Based on preliminary calculations, a liquidation dividend of $0,21 in a dollar would be payable to depositors and creditors or lower if the prevailing macro-economic conditions does not improve, Mugandiwa said last month.
