eBusiness Weekly
Martin Kadzere
MORE than 10 investors are keen to acquire former pharmaceutical giant, CAPS Holdings, but complications around the group’s legacy issues might delay the process, Industry and Commerce Minister Nqobizitha Ndlovu told Business Weekly.
CAPS is among firms whose debts are lined up for restructuring by Zimbabwe Asset Management Company, a special purpose vehicle owned by the Reserve Bank of Zimbabwe.
However, the conversion of CAPS’ debt into equity by ZAMCO is hanging in the balance amid revelations the debt, which ZAMCO purported to have taken over was supposed to be settled by RBZ.
Major shareholders of CAPS Fred Mutanda is challenging the debt takeover by ZAMCO arguing that the central bank had an obligation to pay the debt since it owed CAPS.
The debt arose after the central bank ordered CAPS to deliver huge stocks of medicines in 2008 to National Pharmaceutical Company, a State-owned drug procurement entity.
“It is a very complicated issue which we are working resolving,” Ndlovu said.
“A lot of legacy issues need to be resolved. As I speak, we have more than 10 investors who are keen to invest in CAPS but it is difficult to move on.”
CAPS used to be the country’s largest pharmaceutical firm, supplying 75 percent of national drug requirements.
Mutanda is arguing that there was no basis for ZAMCO to take over CAPS debt and convert it to equity since the RBZ has obligation to settle it.
He recently wrote to central bank governor Dr John Mangudya indicating that the RBZ had the obligation to pay the loans since it owed CAPS about US$7 million.
“I refer to my letter to the ZAMCO chief executive officer regarding claims that ZAMCO acquired the CAPS Holdings debt from CBZ Bank and now intends to do a debt equity conversion at CAPS Manufacturing.
“Yet paragraph 2 of our November 11, 2015, agreement requires that ‘an amount of US$4,087,170 (or US$7,002,231 inclusive of the 5 percent per annum), owed to CAPS Holdings by the Reserve Bank would be used to expunge CAPS Holdings debt exposures with local banks.”
The central bank set up ZAMCO in 2015 as a special purpose vehicle meant to buy non-performing loans from banks that were groaning under the burden of the toxic assets.
According to the central bank, the bad loan ratio increased from 1,8 percent at the end of 2009 to reach an alarming post-dollarisation peak of 20,45 percent in September 2014.
By December 31, 2018, ZAMCO had taken up $1,2 billion in bad loans. Finance and Economic Development Minister Professor Mthuli Ncube has since ordered ZAMCO not to take up any further bad loans.
Some companies that have used ZAMCO to restructure their loans are The Cotton Company of Zimbabwe, RioZim, and starafricacorporation.
Barring exceptional developments that may compel central bank to change its mind, ZAMCO will fold operations after 10 years, but must have fully resolved the $1,2 billion it acquired.
CAPS delisted from the Zimbabwe Stock Exchange in 2011. Then, shareholders, at the extraordinary general meeting on June 30, 2011, approved the resolution to increase the company’s share capital by issuing new ordinary shares to raise US$15 million for repaying loans and recap.
Zimbabwe is now receiving most of its drugs from Indian companies and CAPS struggles to stand.
