Documents in the possession of the Zimbabwe Independent show that for the past three months talks between Meikles and KFHL have been intensifying amid offers and counter-offers which have pushed the issue into a critical stage that brought in Biti and Gono to prevent collapse of dialogue and destabilisation of the fragile banking sector. Before Biti and Gono intervened, the dispute had reached a stage where Meikles and embattled KFHL founder Nigel Chanakira’s Valleyfield Investments (Pvt) Ltd were locked in delicate negotiations. Numerous meetings were held to resolve the issue. Some of the meetings included Chanakira and Meikles chairman Farai Rwodzi as well as Gono as the mediator. The Independent has minutes of those meetings. A number of meetings were held in June, July and August between Meikles, KFHL and Gono. Minutes of the meetings show that Rwodzi approached Gono in June in a bid to resolve the dispute between his company’s boss John Moxon and Chanakira. Rwodzi presented various options to resolve the dispute, saying Chanakira did not seem to have a solution after the lapse of the initial April deadline. Gono agreed that the proposals could be discussed in Chanakira’s presence.“On June 25 Rwodzi called Chanakira who was in South Africa for a meeting with Gono and eventually on July 14 a meeting was held ahead of the Meikles AGM scheduled for July 23,” minutes of the meeting reveal.“Gono opened the meeting by outlining that he had recently been mandated by cabinet to mediate between Moxon and Chanakira to resolve matters pertaining to the Kingdon-Meikles dispute in the context of averting the destabilisation of the banking sector.”Discussions focused on the US$22,5 million issue which had been transferred from KFHL to Meikels on June 11. The US$22,5 million sum was lodged with the central bank by Meikles in 2004. The funds were used to recapitalise Kingdom Bank and its three subsidiaries to meet the prescribed minimum capital requirements.They also discussed board appointments to Meikles and KFHL on which they could not agree. Rwodzi resolved that the KFHL AGM scheduled for July 19 should not be held. The meeting with Gono stated that parties to the dispute should not make any press statements on the issue.Further meetings were held on July 16, July 23 and August 3. On August 5 the meeting could not be held as Gono was tied up. Gono however gave the go ahead on regulatory approvals. The matter however deteriorated again between August 7 and 9 after Meikles published press adverts saying its board had rejected Chanakira’s offer. After that negotiations continued, mainly with exchanges between lawyers. Before Biti and Gono came into the fray, Chanakira, through Valleyfield, had last month proposed to pay the US$15 million to Meikles/Moxon in two tranches of US$7,5 million over 180 days. Gono particularly came in as mediator after Chanakira missed deadlines for payment and made Meikles shareholders and the board edgy. In a letter dated August 4, written by Valleyfield’s lawyers Dube, Manikai & Hwacha, Chanakira proposed to pay Moxon the amount in two settlements over six months.“The initial payment of US$7,5 million shall be fortified by Valleyfield producing to Meikles a letter of financing to US$7,5 million on behalf of Valleyfield issued by African Banking Corporation (BancABC),” the letter says. “The balance of US$7,5 million shall be payable within 180 days.”However, Meikles’ attorneys Scanlen & Holderness wrote a letter on August 6 rejecting the offer. “The Board of Meikles Limited met this morning and resolved that your client’s offer is unacceptable,” the letter says.Meikles complained through its lawyers that the US$15 million which Chanakira was supposed to pay was a “heavily discounted price”. Meikles said it expected “a minimum of US$15 million cash”.It also rejected Chanakira’s offer of payment in two tranches, saying the offer was “conditional” as it needed authorisation by the Valleyfield board. Besides, Meikles said BancABC had only confirmed receipt of an application for a credit facility, not approved it. Meikles also said it could not allow Chanakira to take control of KFHL upon just paying only “50% of a heavily discounted price”. It also said the US$22,5 million ceded to it by the Reserve Bank had not yet been regularised. Documents show Biti had to intervene with proposals on August 26 after Gono had written to him making his own proposals. Biti proposed a “win-win situation” to resolve what he called a “vicious and unkind corporate war”.Before Biti wrote to Gono on August 26, the central bank boss had in fact written to the minister on August 23 making his own proposals to resolve the issue.Gono proposed a “road map” to achieve “fairness, equity and justice” in the issue. He said as a way of resolving the issue government must insist on “fair valuation” of both entities. The valuations must take into account “known factors and statements of accounts as shown in the latest audited statements and ascribing values or answering to queries raised in those audited set of accounts”, he noted.Gono quoted a report by independent Meikles auditors, Deloitte, which made an adverse opinion on the financial performance of the company and cash flows largely because it was “unable to obtain sufficient appropriate audit evidence to verify whether material amounts held by a related party, Coolby Investments (Proprietary) Ltd and by Mentor Africa Ltd (Mentor) were recoverable or not”.Gono also questioned how Meikles had arrived at the US$15 million it was demanding from Chanakira. He also said there were other outstanding issues such the US$18 million which Coolby allegedly owed to Meikles and US$4,5 million which Mentor Africa must bring back from offshore. On the issue of valuation, Biti and Gono had different views. While Gono wanted valuation, Biti said this would inevitably lead to fresh disagreements. Biti then suggested the issue must be left to the market to determine.Documents show Gono also tried to clear the path for a settlement by approving on August 6 Chanakira’s request for a special dispensation for investment in KFHL. Chanakira had written to Gono two days before asking for the special dispensation for Valleyfield to be allowed to buy 100% in KFHL. However, Gono said Valleyfield should sell 10% of the issued outstanding shares in KFHL to an Employee Share Trust. From the remaining 75%, he said Valleyfield should sell 65% within 18 months to third parties approved by the central bank and remain with the minimum permissible 25%.Gono also said KFHL be given 18 months from August 6 to “recapitalise its regulated entities to the stipulated levels”.The other issue which was blocking a settlement was payment of the US$15 million. Chanakira wants money paid to the Reserve Bank, while Meikles wants its money paid into its bank account at Stanbic. Gono wants the money to come to the central bank, but Biti said it must go to Stanbic. While negotiations are still continuing, Meikles has in the meantime warned Chanakira that he should bear in mind that there were “several options for closure of the matter and they do not all include him”.
Dumisani Muleya
