Bankers demand seats on RioZim board

losing confidence in the firm’s capacity to repay loans advanced.

Sources told Herald Business that BancABC were putting together a debt restructure proposal from the banks, including their demand for board seats.
Kingdom Bank, with the biggest exposure to RioZim, was also reportedly involved in fashioning the latest strategy.

But this does not mean the banks are seeking an equity exchange for the money owed, sources said. What they wanted was to have a say in the running of RioZim.
But RioZim’s managing director, Mr Josh Sachikonye, dismissed the reports as “rumours”, although he confirmed they were working with BancABC.

“We do not have a proposal like that,” he said. “In fact, we are working with BancABC. It is news to me (banks’ proposal for board seats).
“What we have agreed is to work with them (BancABC). This could be agreed on in a week. The market is wrong. Listen to the affected party.”

While he would not disclose the finer details of the discussions with BancABC, Mr Sachikonye admitted the negotiations centred on restructuring the loans.
The banks’ demand for board seats were reportedly based on their sentiment that most shareholders in RioZim were “too passive” to influence decisions.

RioZim Foundation, a 20-percent shareholder in the group, is an employee scheme, controlled by management and the board.
Old Mutual, the second biggest shareholder at 19 percent, does not sit on the board, which leaves the firm without significant external shareholder influence.

Kingdom Bank is owed US$7,5 million, Trust Bank US$3,4 million, Tetrad US$4,8 million, ZB US$5,9 million, Premier US$2,9 million while BancABC and African Bank Corporation Botswana are owed US$8 million.

Other banks exposed to RioZim include Interfin (US$1,5 million), IDBZ (US$2,3 million), Metropolitan (US$1,3 million), Imara (US$1,5 million), Afreximbank (US$8 million) and Renaissance Merchant Bank (US$2,9 million).

Mr Terry Mudangwe of the BancABC said he was unaware of of the alleged banks’ demands. He said the investment banking division dealt with such issues.
Kingdom Financial Holdings chief executive Mrs Lynn Mukonoweshuro would neither confirm nor deny the exposure but requested written questions.

“You know what, I love this market for creativity,” she said. “But please send your questions in writing and I will respond to them when I return to the office.”
But in the response to the written questions, Mrs Mukonoweshuro said they would not disclose confidential information on their transactions with clients.

But sources said banks had lost confidence in RioZim and wanted seats on the board as a desperate attempt to safeguard their interests. The banks allegedly feel Mr Sachikonye, due to retire in a couple of years, did not have much to give in putting RioZim back on track.

“Banks have demanded seats on the board,” said a source privy to developments, speaking on condition of anonymity..
“They want to have a say in RioZim. They have lost faith in Sachikonye, considering he is also due to retire.”

The banks had also lost trust in RioZim as they felt there had not been “tangible” results to show for the huge funding extended to support the firm’s operations.
Sources said Mr Sachikonye had no choice but to agree to the banks’ demands as the loans were already due. If they called them in now, RioZim would go into liquidation, they said.

RioZim found itself in a situation after its proposed US$40 million rights offer collapsed as the underwriter, Essar Africa, pulled out at the eleventh hour.
The firm was disenchanted after realising RioZim was heavily borrowed and required significantly more than the rights offer could raise. Essar would have wanted, as happened when it acquired Ziscosteel, a controlling interest in RioZim, considering the capital required to prop it up..

But indigenisation laws restrict foreigners to a maximum 51 percent stake unless Government provides special dispensation, as happened with Zisco.
In the full year to February 28 2011 RioZim posted a US$880 000 loss compared with US$16,2 million incurred in the comparative period last year.