Published by the government of Zimbabwe
Martin Kadzere
11 November 2009
Harare — CFX Financial Services has warned shareholders the company and its flagship arm, CFX Bank, might have to liquidate if the group fails to recapitalise.
The financial institution will seek shareholders approval tomorrow to proceeded with a rights offer to be underwritten by Interfin Holdings.
Shareholders of CFX FS will also consider directors' proposal to issue new CFX shares to Interfin Holdings by way of a private placement at a premium 10 percent above the rights offer subscription price.
This will be done to an extent it may be necessary for the purpose of ensuring the underwriter obtains a maximum of 51 percent in the issued ordinary share capital of CFX FS post the proposed transaction.
CFX, struggling to meet the Reserve Bank of Zimbabwe minimum capital requirements is on the verge of insolvency due to capital inadequacy. The company has also been making losses as a result.
CFX directors strongly warned shareholders that "in the event shareholders do not approve the proposed transaction, the directors will be left with no option but to liquidate both the company and the bank.
"In addition, failure to comply with the minimum capital requirement could lead to cancellation of the banking licence and subsequent closure of the bank as well as liquidation of the company."
Part of the proceeds from this proposed recapitalisation plan would be directed towards meeting the RBZ prescribed capital requirements.
The transaction expenses will gobble US$500 000, another US$500 000 for business promotion, US$1 million for upgrading IT systems and US$8 million will be directed towards business underwriting.
The injection of fresh capital is expected to provide the bank with a sound capital base to harness lines of credit. "This recapitalisation is therefore vital not only to comply with regulatory requirements, but to strategically reposition the bank in the new environment," said the directors.
Interfin, a former holding company of Interfin Merchant Bank, Altfin Holdings and Interfin Securities is now an investment holding company whose directors are Mr Farai Rwodzi, Mr Christopher Sambaza, Mr Timothy Chingaze and Mr Jeremiah Tsodzai.
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