adminGolden Sibanda Senior Business Reporter
Tetrad Investment Bank provisional judicial manager, the Deposit Protection Corporation, has rekindled discussions with Gustav Limited of Nigeria for funding required to breathe a new lease of life into the troubled institution. DPC would not say how much the bank will now require after it was recently relieved of chocking liabilities, but stressed the point that a lot less is required to kick start its revival.
The decision to re-engage Gustav was taken after creditors and depositors of the bank last month approved the provisional judicial manager’s proposal to convert the bank’s $70 million liabilities into equity. “We are talking to the same investors the previous shareholders of the bank had been talking to; Gustav of Nigeria,” DPC chief executive officer and provisional judicial manager Mr John Chikura said.
Tetrad now requires less funding following the debt conversion. The DPC’s report to the second Tetrad creditors’ and members’ meeting last month states that as at August 31, 2015 Tetrad’s funding gap was unchanged at minus $43 million. Non-performing loans to total loans ratio stood at 99,9 percent as at June 30, 2015.
Further, the provisional judicial manager’s report showed that the bank’s is afflicted with a negative liquidity gap to the tune of $50 million. DPC is the latest among a catalogue of local banks that folded after facing serious liquidity constraints largely emanating from poor corporate governance and wanton abuse of depositors funds.
Banks that have since gone under due to reasons linked to the liquidity crisis and or mismanagement include AfrAsia, Interfin, Capital, Royal Bank, Trust Bank, Genesis Investment Bank and Allied Bank. He said that DPC has since asked the prospective investors into the bank to present proof of funds, which they have not yet done.
Mr Chikura also said earlier suitor, Horizon Capital, has gone quiet. Mr Chikura said that DPC had continued with efforts to identify investors when it took over from the first provisional judicial manager, floating two additional tenders, but this did not yield anything.
“If the depositors and creditors go ahead with the plan (to convert debts to equity), the bank’s balance sheet will be cleaned to a point where it becomes attractive for investors to come in,” Mr Chikura said.
Prior to the debt to equity conversion, efforts by earlier judicial manager, Winsley Militala, had proved largely unsuccessful after all suitors, including widely taunted Horizon Capital Consortium Limited, Mozimpex, Summit Development Group, Finance Bank of Zambia, Key Capital, Kuta Resources and decided not to invest.
Mr Militala was replaced by DPC as judicial manager following sharp differences with depositors and creditors of the bank over his handling of its affairs, including his recommendation to liquidate rather than give investors an opportunity to present their offers.
Misrepresentation of information, loans to insider and related parties without following due process and masking loans to insider and related parties as placements with other banking institutions were cited as the causes behind the collapse of the bank.
According to the PJM’s report, 99 percent of the loan book amounting to US$63 million is not performing. Insider loans amounting to US$19,6 million make up 31,07 percent of the loan book. Poor risk management, misalignment of corporate business strategy and financial resources and inadequate management information systems were also cited as causes for failure of the bank.
Online Reporter