ZAMCO says only 49 percent of US$573 million NPLs are eligible for acquisition


Reserve Bank of Zimbabwe building

THE Zimbabwe Asset Management Company says almost half of the current outstanding non-performing loans of US$572,8 million are eligible for acquisition.

Acting chief executive Dr Cosmas Kanhai said ZAMCO will targeting the eligible loans which constitute 49 percent of the total NPLs.

To date, the bad-loan buying unit of the central bank has purchased US$242 million of NPLs. This has largely contributed to the decline in the level of NPLs from a peak of US$815,90 million (20,14 percent) as at 30 September 2014 to US$572,81 (14,25 percent) as at 30 September 2015.

“The NPL clean-up exercise is going on well with total NPL purchases now in excess of US$200 million. ZAMCO is focusing on acquiring loans that are secured by mortgage bonds i.e. real estate properties.”

Kanhai said that ZAMCO is acquiring the loans at a discount from banks. However, the level of the discount varies from loan to loan depending on factors such as the value and quality of collateral as well as the credit risk level of the underlying borrower.

The company would also buy debt from the failed banks, he said. “ZAMCO can acquire loans for banks that are under the purview of the Deposit Protection Corporation as part of resolving the NPLs held by the failed banks. However the decision to sell to ZAMCO rests with the DPC.”

Kanhai said ZAMCO had not yet started selling some of the NPLs to investors as they are still on the acquisition phase.

“ZAMCO’s NPLs Resolution Policy provides for a number of resolution options for acquired loans, including sale of NPLs to investors in distressed assets. In this acquisition phase ZAMCO is focusing on acquiring NPLs that have viability prospects. The resolution techniques that are being applied on such NPLs are plain loan restructuring and/or debt to equity conversions.”

ZAMCO is purchasing loans using treasury bills that are naturally tradable and are risk free instruments as they are backed by the Government.

Kanhai said operational funding is provided by the Reserve Bank of Zimbabwe, as well as from other income generated by the corporation from its activities. “Funding for acquisition of NPLs will come from government in the form of treasury bills.”

On the sinking fund ZAMCO had established to help meet the debt servicing obligations for government securities, Kanhai said the facility is funded by collections (realized either through repayments, disposals or foreclosure of collateral) that the corporation makes on the acquired non-performing loans. FinX

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