CFX Financial Services (CFX FS) "begged" Interfin Holdings Limited to take up a controlling shareholding in the institution as it raced against time to meet the minimum capital requirements for the bank, according to information obtained last week.
Finance Bank of Zambia (FBZ) was the front runner for the CFX FS stake up until the last minute when Interfin sprang a surprise and agreed to underwrite the US$10 million rights offer on condition that it gets a controlling shareholding in the institution.
In the run up to the September 30 minimum capital deadline set by the central bank, FBZ executives had been shuttling between Lusaka and Harare to finalise the tie-up.
CFX FS's principal subsidiary CFX Bank is struggling to meet the US$6.25 million minimum capital requirements set by the Reserve Bank of Zimbabwe (RBZ).
So far the bank has US$1.25 million and the money raised from the rights offer will be adequate for the bank to be compliant with the March 2010 minimum capital requirements of US$12.5 million.
Details obtained last week show that FBZ were scared by former ENG director, Gilbert Muponda's claims that CFX FS's takeover of then Century Bank, which the businessman claims belonged to his now defunct ENG Capital Limited was improper.
Muponda claims 309 million shares belonging to Century Bank were fraudulently sold at the time of the merger.
Muponda even went a step further by writing to Credit Suisse to dissuade them from taking up shareholding in CFX FS. Credit Suisse has 40% shareholding in FBZ.
With FBZ dragging its feet after Muponda's claims, CFX FS had no choice but to approach Interfin, close sources said last week.
Emissaries from CFX FS were sent to Interfin persuading the cash-rich investment holding company to partner them in their hour of need.
"CFX directors begged Interfin to come and take up a controlling shareholding as they had little option to raise the required US$6.25 million as per central bank minimum capital requirements," a close source said.
"Interfin had the money and they called the shots and this is the reason why they are underwriting the rights issue on condition that they will get 51% post the rights issue."
CFX managing director Emmanuel Tagarira told Standardbusiness that the market was aware that CFX were failing to raise the required minimum capital and the coming on board of Interfin was a response to the distress calls.
He confirmed that they had approached Interfin for a helping hand.
Tagarira said Muponda's claims had scared off the Zambian firm from taking up a shareholding in the institution.
Asked whether Interfin were not affected by Muponda's claims, Tagarira said: "Being locally owned, they know what happened to Muponda"
The rights offer opened on Monday and will close on Friday. The listing of the new shares on ZSE is scheduled for December 3.
In terms of the agreement, CFX FS will issue new ordinary shares to Interfin by way of a private placement at a premium of 10% above the rights over price, only to the extent that it enables the underwriters to get a 51% stake in the issued ordinary share capital of CFX FS after the proposed transaction.
Should there be any balance of the unsubscribed rights offer shares remaining after satisfying the 51% shareholding cap, directors, "will through a private placement issue irredeemable non-convertible and non-cumulative preference shares at (London Interbank Offered Rates (LIBOR) plus five percent per annum to the underwriter."
Interfin Holdings Limited is a former holding company of Interfin Merchant Bank, Altfin Holdings and Interfin Securities among others.
After the unbundling exercise that occurred in the Interfin group, Interfin is now an investment holding company.
Its four directors -- Timothy Chiganze; Jeremiah Tsodzai, Christopher Sambaza and Farai Rwodzi -- sit on the boards of various listed companies.
CFX and Zimbabwe Allied Banking Group (ZABG) are still to meet the minimum capital requirements of US$6.25 million as of September 30.
However, the RBZ has already given the two institutions some time to put their houses in order.
ZAGB will be returned to its previous owners while the rights issue saved CFX's day.
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