Hospitality firm taken to court over US$1m debt

Source: Hospitality firm taken to court over US$1m debt | Herald (Business)

Fidelis Munyoro Chief Court Reporter
The Zimbabwe Asset Management Corporation (Zamco) has taken Mazowe Gardens Plaza to the High Court seeking to recover a $1,162 million debt it took over from a local financial institution.

Zamco is a special purpose vehicle established by the Reserve Bank of Zimbabwe to hive off non-performing loans (NPLs) from the balance sheets of banks to be able to lend.

In its claim filed at the High Court last week, Zamco is seeking to recover  $1 161 864,93 being an outstanding balance after the company defaulted on payment of an overdraft facility, a credit facility and mortgage finance of up to US$885 333,33.

Mazowe Gardens Plaza, which is listed as the first defendant, is a hotel which trades as Orange Grove Hotel and Conference Centre in Chinhoyi and as Nakas Cuisine Gardens in Mount Pleasant, Harare.

Other defendants are Arosume Property Development (Pvt) Ltd, Nyasha Muzavazi, Memory Muronzi, Manson and Caroline Mnaba, all being sureties to the  loan. The loan was obtained from CBZ Bank Ltd in July 2015. The overdraft facility allegedly expired on November 30, 2015 and the mortgage facility was repayable over a three-year period expiring on February 28, 2018, by way of monthly instalments of US$21 888,59, together with interest.

According to court papers, the interest which was to be capitalised was to accrue on the facility at the minimum rate of 18 percent per annum and an additional 1,25 percent annually.

“The first defendant (Mazowe Gardens Plaza) agreed to pay bank charges regarding the administration of the account,” read the papers. In the event of the first defendant defaulting on making due and punctual payments of any instalments, the total outstanding amount thereunder would immediately become due and payable.”

It was also a term of the agreement that in the event of CBZ instituting legal proceedings against Mazowe Gardens Plaza for the recovery of any monies due, CBZ would be entitled to legal costs on an attorney-client scale and collection commission in terms of the law society by-laws.

The facility was secured by unlimited guarantees for all sums due and recoverable by the company directors Nyasha and Davidzo Choice Muzavazi and other co-principal debtors to a combined tune of US$1 079 000.

“Under the agreement, CBZ lent and advanced to the first defendant a total capital sum of US$788 000. On diverse occasions the first defendant defaulted in making due and punctual payment of its instalments, interest and bank charges,” said Zamco

In April 2016, Zamco and CBZ entered into an agreement whereby the former took over all CBZ rights, interests and Mazowe Gardens loan which was not performing.

“At the time of the takeover of the loan, the capital due was US$894 643,12 and the interest due was US$22 805,65 and, as of August 2017, the total sum owing was US$1 014 914,21,” Zamco said.

In June 2018, Mazowe Gardens repaid the sum of US$120 000.  It then undertook to pay US$80 182,36 by December 2018 and US$128 058,66 by June 2019, but the hotel company defaulted in both cases.  This resulted in the current total outstanding amount under the agreement being  $1 161 864,93, as at November 30, 2019.

Mazowe Gardens and its co-debtors are yet to respond to the lawsuit. This year, Zamco has collected about $103 million during the eight months to August 2019 as the debt recovery firm looks at recovering all non-performing loans by 2025.