7 March 2014

Zimbabwe: Wall Street Bankers Rescue Obert Mpofu

A Mauritian BASED consortium headed by former Wall Street bankers has removed an albatross around the neck of Transport minister Obert Mpofu, who was struggling to raise funds to keep his struggling Allied Bank afloat, after they structured a significant take-over deal.

Details of the deal are contained in a letter, seen by the Zimbabwe Independent, sent to staff on March 5, in which Allied Financial Holdings Ltd chairperson Farai Mutamangira announced Terence Mukupe would lead the banking group as CEO.

This comes as it emerged Mpofu had been reviewing his position in the bank after he acquired more than 90% equity stake when he bought the bank in 2012 through his Trebo & Khays company. Allied Bank executives described the deal, which awaits various regulatory approvals, as a "timely lifeline".

At the time of the acquisition of Zimbabwe Allied Banking Group (ZABG) -- as Allied Bank was known as then -- the institution had a negative capital of around US$10 million. ZABG required about US$15,3 million to close its negative capital base and another US$12,5 million to meet the central bank's minimum regulatory capital threshold.

Sources said even if millions were poured in, Mpofu had been under pressure to sink in more funds to meet statutory capital requirements and save his personal assets.

A source close to the bank said: "The bank has a lot of legacy issues that Mpofu had to deal with such as liabilities emanating from the unbundling of ZABG."

Information gathered by the Independent this week shows that Allied Fund, a Mauritian-based fund, will control Allied Financial Holdings while the owners of the bank will immediately unlock US$30 million in capital.

This will lift the bank's capital base to between US$25 million and US$30 million.

In January, the central bank revised minimum statutory capital requirements from US$100 million by June this year to US$25 million for commercial banks, a relief to struggling institutions.

Some indigenous banks had failed to comply with the phased recapitalisation plan. However, banks are now expected to have capital of US$100 million by 2020.

Mukupe has a wealth of experience in banking spanning various markets from Wall Street to Moscow.

He worked for the Royal Bank of Scotland in New York; Knox Lawrence, a private equity firm; and Renaissance Capital Zimbabwe, a local division of the leading Russian investment banking firm that operates in high-opportunity emerging markets. He also worked for BancABC as treasurer.

Allied Financial Holdings, according to sources, is going to be acquired wholly by a listed fund in Mauritius which in turn will raise capital for Allied Bank.

Debbie Peters, a seasoned Wall Street banker, is understood to be part of the Mauritian-based fund.

Peters has experience in capital raising, private equity, fund management and investments in New York, Johannesburg and Lagos markets.

Under the new structure, Mpofu is set to have his equity significantly diluted to 25% post the transaction.

According to sources, the bank will pursue a phased recapitalisation plan, having already mobilised US$30 million.

The acquisition by Allied Fund means Mpofu, specified under United States sanctions, will now sleep much better as this takes off pressure on him by Office of Foreign Assets Control (Ofac) of the US Department of the Treasury as owner of the institution.

Ofac has been giving institutions and individuals connected to Zanu PF sleepless nights through its tight financial sanctions on them.

Mpofu is, however, said to be eventually considering exiting the bank when the Allied Fund lists in Mauritius in the next couple of months to raise additional funding from investors.

"This will be a good time to cash out for him. It has not exactly been a prudent investment," a source said.

Mukupe and Peters' backgrounds are expected to play a pivotal role in raising capital for the bank and the pursuit of opportunities in various sub-sectors in the financial services industry.

"The shareholders want to see the bank among the top three banks in Zimbabwe if everything goes according to plan," a source said.

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