CFX Financial Services has appointed potential suitor Zimre Holdings to underwrite its extra-large $1,5 trillion rights issue expected to commence on Fri
day next week, businessdigest can reveal.
The move is likely to give Zimre — an institutional investor of note on the local bourse — a foothold in the banking group.
Zimre is expected to snap up shares not taken up by shareholders during the rights issue.
Businessdigest estimates that the rights issue could be undersubscribed by at least 20%.
The government, which controls 15,9% of CFX through its Allied Financial Services (AFS), is unlikely to follow its rights due to serious financial problems. Sources indicated that government was battling to raise cash to recapitalise other financial institutions in which it had significant stakes.
CFX depositors who converted their deposits into cash earlier this year control 39,1% of CFX. Not all of them are likely to follow their rights.
The rights issue is one of the largest by a banking group after a similar one by Kingdom Financial Holdings in June to raise a similar amount for the recapitalisation of its commercial bank. CFX intends to use the cash raised from the rights issue to shore up their capital ahead of a September 30 deadline for new capital levels for banking institutions.
CFX had been courting Zimre for an unspecified cash injection in return for equity in the financial institution which had also engaged one of Germany’s largest banking institutions, Deutsche Bank, for a possible sale of equity to raise cash.
Sources said the appointment of the cash-rich Zimre as the underwriter to the rights issue will create an avenue for Zimre’s entry into CFX as some shareholders are unlikely to follow their rights, therefore leaving huge shares for purchase by the underwriter.
CFX, which is currently on a recovery path after almost twisting in the wind against the backdrop of accumulated losses which had been concealed by Century Holdings before the two institutions’ merger in 2004, was re-opened and re-listed on the Zimbabwe Stock Exchange earlier this year after a reconstruction exercise by major shareholders.
Businessdigest understands that CFX is still pursuing investment talks with Deutsche Bank as revealed by businessdigest mid-June.
A source said talks between CFX and Deutsche Bank had been temporarily postponed pending conclusion of the rights issue.
They are expected to resume in September.
“Foreign investors (Deutsche Bank) want the fund-raising to be completed first before they resume the talks. I am sure they will resume at end of September. In the meantime the contact is still there,” said the source.