Star Africa falls under quasi-state control after debt deal

Star Africa falls under quasi-state control after debt deal

HARARE, November 17 (The Source) – Star Africa shareholders have approved a debt-equity swap arrangement which will see the central bank’s asset manager assuming its $32.2 million liabilities in a transaction that will see quasi-government entities taking a controlling stake in the sugar manufacturer.

Under the deal, the Zimbabwe Asset Management Company (ZAMCO), created by the central bank in 2014 to mop up bad loans in the banking sector, will take up a 48 percent shareholding in Star Africa. Statutory pension fund, National Social Security Authority (NSSA) will hold 30.7 percent in the firm, giving the two institutions effective 78.7 percent control.

Other creditors will own 13.58 percent while current Star Africa shareholders will remain with 7.29 percent.

NSSA has been Star Africa’s life-line since 2012, when it lent the struggling sugar manufacturer $7 million to refurbish its Harare refinery.

Star Africa owes significant amounts to several banks, including BancABC $15.8 million, Afreximbank $10.9 million and the Infrastructure Bank of Zimbabwe $2.1 million. It also owes the now defunct AfrAsia Bank Zimbabwe $2.5 million and Stanbic Zambia and Intermarket Bank Zambia $600,000 and $659,000, respectively.

Since its establishment two years ago, ZAMCO has been involved in efforts to rid several firms of debt in a bid to aid their revival. These include miner Rio Zimbabwe, cotton processor Cottco as well as fast moving consumer goods manufacturer Cairns, among others.

By June 30, 2016, ZAMCO had purchased up to $524.8 million in bad loans, according to RBZ data.

Another Star Africa creditor, Zimbabwe Sugar Suppliers (ZSS), will convert its $11 million debt to a loan at seven percent rate interest for five year tenure.

“They have agreed to convert what they are owed, $11 million, into a secured and convertible loan with an interest rate of seven percent and it’s a five-year instrument. Their security will remain, which is the pledge of shares in Botswana together with a guarantee value of $5,4 million,” said meeting convener Edwin Manikai.

Established in 1935 solely as a sugar refiner, Star Africa, which traded as ZSR Corporation until its changed its name in 2006, was part of Tate & Lyle until 2002, when the global sugar giant divested and sold majority control to local management and workers.