Zamco acquires NPLs worth $528m

The Zimbabwe Asset Management Company (Zamco) has acquired secured non-performing loans (NPLs) worth $528 million as at June 30, a move that has cleaned the balance sheets of most banks.

Source: Zamco acquires NPLs worth $528m – The Standard September 3, 2016


Zamco is a special purpose vehicle (SPV) created by the Reserve Bank of Zimbabwe in 2014 to buy NPLs from banks as a way to clean their balance sheets and allow them to lend again to various sectors of the economy.

This was necessitated by a high loan default rate which hit an all-time high of 20,45% in June 2014 triggering fears that banks would cut back on lending.

Zamco chairperson Bart Mswaka told Standardbusiness that it had not been difficult to secure the loans as Zamco only requested offers for sale of secured loans from selling banks.

“Zamco has set a sunset period of 10 years during which it expects to have achieved its mandate. It is very early to talk about how much has been recovered from the NPLs portfolio as most of the NPLs acquired have been restructured into long-term loans of up to eight years,” Mswaka said.

He said some of the borrowers were granted repayment holidays meant to allow them to save some cash flows, which would be channelled towards working capital in order to resuscitate their businesses.

“Zamco only requests information on secured loans from banks. Assessment is done on secured loans to evaluate the viability prospects of borrowers. Zamco does not focus on unsecured loans,” Mswaka said.

Asked on how much assets the SPV held, Mswaka said the assets for the acquired NPLs were owned by the borrowers and not by Zamco. The assets were pledged to Zamco as collateral, he said.

“However, the assets will become proprietary assets of Zamco in the case of a debt asset swap. Further, Zamco may foreclose on these assets in the event that the company fails to turn around.”

Mswaka said the SPV had various options that included loan restructuring (extending the loan repayment period), reducing interest rates and capital repayment holidays, debt asset swap, disposal and sale of NPLs to investors in distressed assets.

He said Zamco also had options of negotiated settlement whereby there would be an agreement with the debtor for final settlement at an acceptable discount at face value of the debt or forced sale of collateral to settle debt.

“The method of collection for each NPL will be loan-specific. Some loans will be restructured to provide opportunity for companies with viability prospects to implement appropriate strategies to turnaround their fortunes and be in a position to generate revenue to repay their obligations,” he said.

Mswaka said once the acquisition stage was over which was expected to be completed by year end, the focus would be on resolution. He said recovery would be the pre-occupation of Zamco for the remaining years of existence.

During the first half of this year, a number of banks reported that Zamco had taken some of its bad loans. Although the SPV do not take the loans on a one on one basis, most banks managed to recover from the bad debts through Zamco.

Banks recorded positive earnings in the full year to December 2015 with aggregate after tax profit rising to $128 million during the period from $79 million in 2014 after they transferred some of the NPLs to Zamco.

RBZ targets an NPL ratio of 5% by December 31. This has seen banks being tough on lending with a number of them advancing loans only to profitable businesses.