The twelve month $19 million bridging loan facility secured in 2018 by the Industrial Development Corporation (IDC) sourced from one of its high performing portfolio companies, ZCCM IH, has now been settled.
IDC CEO Mateyo Kaluba’s Team approached the ZCCM IH management team early 2018 for a loan facility whose sole purpose was for securing financing for investment purposes. A bridging loan is a type of short term collateral backed finance. The transaction which was classified as a Small-Related-Party Category 2 type according to LuSE classification, was finalised in June 2018.
“On 2 April 2018, ZCCM Investments Holdings Plc (“ZCCM-IH” or the “Company”) and the Industrial Development Corporation Limited (“IDC”), majority Shareholder, entered into a related party transaction through a Loan Facility Agreement whereby ZCCM-IH advanced a loan amount of US$19,000,000 to the IDC with a maturity period of 12 months”, read a statement from the ZCCM IH Board published on SENS on 23 April 2019. ”ZCCM-IH wishes to announce that the IDC has fully settled the principal and interest amounts owed to ZCCM-IH.”
The Board of ZCCM-IH considered and approved IDC’s request on 29 March 2018. The bridging loan payment was made on 2 April 2019 in line with the Loan Facility Agreement between the parties, according to a statement from the Board of ZCCM IH issued on 15th June 2018. ZCCM IH advanced the loan on commercial terms. Therefore, this required some form of security hence IDC using its 360,937,534 ordinary shares in Zambia National Commercial Bank Plc (“ZANACO”) as collateral.
Transaction of this nature also require independent experts to conduct due diligence on the viability of the transaction and IDC’s ability to pay back. This information was the basis the ZCCM IH management team used in giving the facility to IDC.
“The Independent Expert (“Expert”) conducted an analysis on the terms of the Transaction to ascertain the extent to which the terms of the Transaction are fair and reasonable as far as the minority shareholders of ZCCM-IH are concerned”, read the statement from ZCCM IH regarding due diligence being conducted. ”The Expert has declared that the Transaction is Fair and Reasonable, and the fairness opinion will be available for inspection by shareholders at the ZCCM-IH offices for a period of 28 days from Friday, 15th June 2018”.
For Mabvuto Chipata (CEO), such deals for ZCCM IH have become the hallmark of their investment ambitions as they pursue value growth for investors. At the time the transaction was penned and signed, Mr. Chipata sat in the Chief Investment Officer’s saddle overseeing the mechanics of the deal. At maturity of the deal, he heads to his board with full confidence that his team made another prudent investment.
Industrial Development Corporation Limited (“IDC”) is the majority shareholder in ZCCM Investments Holdings Plc (“ZCCM-IH”), holding 60.28% of the total issued share capital of ZCCM-IH.