Business

Kingdom Bank liquidation hits snag

Marinelli wants to do his job without creditors micro managing him
 
Marinelli wants to do his job without creditors micro managing him

In a seven-hour long heated meeting in which BusinessWeek played fly on the wall, creditors refused to adopt resolutions that would have authorised Marinelli to execute the liquidation, beginning with the sale of the KBAL headquarters in Gaborone.

According to the Company’s Act, a liquidator is only empowered to execute his duties by a set of resolutions adopted from a full creditors’ meeting.

The KBAL creditors instead, proposed to form a steering committee that would work hand in glove with the liquidator and jointly approve the sale of any assets.

KBAL, which had no resident depositors based in Botswana, was in May placed under liquidation due to insolvency after an audit uncovered an $18.7 million mismatch between assets and liabilities. 

“We seem to have lost trust in the way the liquidator is handling this process,” Chap Masteron, a spokesperson of the creditors, said. “The liquidator has not provided us with enough information for us to be able to make informed decisions. It would be imprudent for us to adopt all these resolutions, some of which are too general and open ended.”

Among some of the 29 resolutions that needed to be passed for the liquidation to progress included, authorising the liquidator to collect outstanding debts, institute legal action against debtors, sell immovable assets by public auction and engage lawyers and auditors.

The creditors also declined a resolution for the liquidator to pay himself P348, 500 for the work he has done since his engagement in May.

“Without adoption of the resolutions, I am unable do anything. I will not have the authority to go after those that owe the bank. It’s not a tenable situation. While I still have other legal options that I can pursue to be able to do my job, I am very disappointed by the lack of cooperation from the creditors,” said Marinelli, a partner at Deloitte Botswana.

Marinelli said he would now seek legal counsel on the best way forward.

KBAL depositors and debtors are predominantly in Zimbabwe where the bank originates.

Creditors’ claims that have been accepted by Marinelli so far amount to $15.4 million while the liquidation account currently only hold $194,000.

Among some of KBAL assets to be liquidated include KBAL building in Kgale Mews, telecommunications equipment in Harare plus a $11 million loan book, whose recoverability is truncated by geographical challenges as well Zimbabwe’s depressed economic landscape.

According to the balance sheet compiled by Marinelli in May, KBAL had liabilities to the amount of  $19.1 million. On the other side of the balance sheet, the bank owns assets worth a mere $2.4 million with the bulk of that money in the form of advances to customers amounting to $1.8 million.

On the best-case scenario, Marinelli however estimated that the recovery rate can rise to 27 percent as the recoverability of the advances to customers and assets held offshore cannot be fully ascertained at present.

Information at hand shows that KBAL’s liquidity and solvency matters largely stem from a shareholder dispute at its parent company in Harare, which resulted in the offshore bank losing  $17 million in near-cash financial instruments invested in the holding company, Kingdom Bank Zimbabwe (KBZ).

KBAL, which was 100 percent owned by Zimbabwean businessman, Nigel Chanakira, was registered in Botswana in 2003 with KBZ, as its parent company and technical partner.

KBZ would later enter into a partnership with Mauritius based Afrasia, but the business later ran into financial difficulties resulting in a separation between Chanakira and Afrasia.

The $17 million investment made by KBAL in KBZ could not be retrieved due to liquidity constraints in Zimbabwe, resulting in the shareholders agreeing to swap assets. Chanakira was thus bought out of KBZ through 100 percent ownership in KBAL as well as some telecommucations  equipment owned by the banking group. The equipment which KBAL estimates to be worth $10 million has however been written down to zero value by the temporary managers or $1 million in the best-case recoverability scenario.

The liquidators have also written down KBAL’s loans and advances to customers worth $11.6 million to $1.7 million due to recoverability uncertainties.