Development Bank of Zambia (DBZ) has given two institutional shareholders of Zambian Airways 30 days in which to pay K28 billion guaranteed for loans awarded to the airline, failure to which they will be taken to court.
According to the latest issue of Executive Issues, the Post Newspaper and JCN, which is owned, by Mutembo and Nchima Nchito had failed to pay K14 billion each that they offered DBZ as guarantee for some of the airline’s loans.
The Executive Issues states that DBZ has since given the Post Newspaper and another shareholder JCN, 30 days in which they should pay K14 billion each for guaranteeing the loans, which were given to the company before it suspended operations.
DBZ is claiming K28 billion from both JCN and the Post Newspaper after they signed an undertaking to buy-back equity from DBZ in October 2008, it said.
“We, Post Newspaper Limited, further undertake to hold this undertaking valid and legally binding on ourselves until the execution of the irrevocable joint and several share buy-back guarantee by all the shareholders of the Zambian Airways,” reads part of the undertaking as quoted by the Executive Issues.
The undertaking was made on the understanding that DBZ would swap its loan exposure to Zambian Airways into equity, provided that the two key shareholders undertook to buy-back the shares at a later stage.
Following the execution of the buy-back options, DBZ proceeded to take equity in the airline and released the debentures and securities it had on Zambian Airways to Finance Bank Zambia Limited, which had made a capital injection of over US$ 5 million in the airline.
The publication said the directors of Zambian Airways decided to abruptly suspend the operation of the airline before the transactions could be concluded. This prompted DBZ to demand for the buy-back commitment made by the Post Newspaper and JCN.
The two institutions failed to honour their obligations within the 30-day period and DBZ intends to sue the two companies to claim their dues.
The Post Newspaper had also undertaken to takeover part of the Zambian Airways debts with Intermarket Banking Corporation to the tune of $1.5 million in order to facilitate for DBZ to swap its loans into equity.
The publication added that the Bank of Zambia (BOZ) had also joined in the Zambian Airways scam by questioning the decision by the DBZ management to pump money into the airline at a time when it was clear that the company’s financial position according to its books was weak.
According to correspondence from the Central Bank directorate of non-bank financial institutions supervision, the loans, which DBZ provided to Zambian Airways, were irregular as it was against the Banking and Financial Services (Large Loan Exposures) Regulations.
The publication further says key financial institutions had agreed to place the airline in receivership following protracted meetings and negotiations, which had failed to yield any meaningful survival plans.
Initially, it was conceptualised that the current shareholders of the airline should exit and carry the debt burden while new investors should be invited to literally start the airline afresh.
But some investors had shown interest in taking up the company under a new flagship, Zambian Airways 2009 Limited but the proposal was not universally accepted by other creditors who include Finance Bank Zambia Limited, Investrust Corporation Plc, Intermarket Banking Corporation, Development Bank of Zambia and NAPSA.
The publication said it also emerged that Zambian Airways directors and management had proposed to the Government in December 2008 to consider bundling all Government-connected debts in the airline into equity through DBZ.These State entities are the DBZ, National Airports Corporation (NAC), Zambia Revenue Authority and NAPSA.
Meanwhile, the forensic probe into the conduct of the Zambian Airways activities by the combined team of the Anti Corruption Commission (ACC), Drug Enforcement Commission (DEC) and the Zambia Police had, according to Executive Issues, revealed glaring instances of financial scams.
[Times of Zambia]