Well-placed sources at Fidelity said this week that
millions of United States dollars in policyholders’ funds could be lost should
the Langford Estates sale be reversed.
The sources said uncertainty around the land deal had
forced management at the life assurance company to hold off the development of
stands on the contested land.
“The company is extremely concerned that the Langford deal
could see policyholders losing as much as US$30 million if the sale is
reversed,” one source who declined to be named revealed.
“The development of residential units has also been put on
hold. Everything is now on hold.”
CFI Holdings and Fidelity are locked in litigation over
Langford Estates with the diversified agricultural group challenging the legality
of the transaction that saw the life assurer acquiring 81 percent stake in
Langford Estates, an 834-hectare housing development prospect in Harare South.
The matter has been before the courts for three years now.
The sale of Langford was approved by Fidelity and CFI shareholders at their
respective Extraordinary General Meetings (EGM)’s held in October 2015.
But the validity of the deal was questioned after an
internal CFI dispute that saw British business tycoon, Mr Nicholas van
Hoogstraten, emerging as the company’s controlling shareholder.
Almost as soon as he had assumed control, the businessman
commenced a process of reversing the transaction, describing it as
“fraudulent.”
Sources said Langford Estates, which was purchased by
Fidelity for a cash consideration of US$18 million, was snapped up as part of
the listed life assurance firm’s drive to invest policy holder funds in
inflation-proof investments.
Fund managers tend to allocate capital towards asset
classes like real estate and equities to preserve value in inflationary
economic environments. Sources say Langford Estates, an asset which underpins
the life savings of policy holders, would severely impact the savings and lives
of over 140 000 principal policyholders.
The sources added that the legal wrangle had also stalled
development of around 12,000 residential units, which were planned to support
the Government’s National Housing programme.
The dispute has its roots in a 2015 deal to restructure
CFI’s capital structure. In June 2015, Fidelity entered into a Debt Assumption
and Compromise Agreement with CFI and five commercial banks. Under the
agreement, Fidelity assumed CFI’s debts and obligations worth US$18 million in
exchange for an 81 percent equity stake in Langford Estates (Private) Limited,
which owns 834 hectares of land earmarked for residential stands development.
When the deal was inked, it was met with jubilation by
ordinary people seeking affordable housing and the Government, which has
expressed its commitment to partner with the corporate sector to ease the
country’s housing shortage.
The transaction was necessitated by CFI’s need to
restructure its balance sheet by eliminating its then insolvency status that
had become a source of discomfort for creditors, causing panic and threatening
attachment of assets.
Fidelity Life marketing manager Melanie Gumbo, would not be
drawn to comment on the matter yesterday.
“The specific questions you have raised relate to a matter
that is before the courts. We feel commenting on this would amount to
disregarding subjudice rules,” Mr Gumbo said.
Fidelity Life maintains that all conditions precedent for
the transaction to be consummated were met and therefore the transaction
remains legal, binding and enforceable.
The ZSE ruled that the results of the EGM used by
Willoughby, van Hoogstraten’s investment vehicle, which controls his
shareholding in CFI, were in contravention of ZSE listing rules.
“What makes the issue more curious is that the transaction
was motivated by CFI’s financial distress,” another source said.
CFI was exposed to a number of banks that were secured,
through a Security Sharing Agreement, by the land held through Langford Estates
and the banks had called in their loans.
The agricultural concern faced the real risk of losing the
land due to foreclosure and tried without success to sell the land over a
period of time in order to settle the debts to the banks.
The company’s management feared the land would be auctioned
at a massive discount to its underlying value.
All shareholders or their representatives were in
attendance at the EGM and did not raise any objections and the resolutions were
unanimously passed.
Delays in the legal process and impending plans to be
triggered by CFI have stopped all further developments on the land in question,
further eroding policyholder value, sources say.
Fidelity reported inflation adjusted core revenue of $450.7
million, 96 percent compared to $ 229.6 million from prior year in the five
months to May 2021.
The company’s life insurance businesses, the Zimbabwe and
Malawian operations, continue to be the major contributors to core revenue
growth contributing 84 percent of total core revenue, the company said in a
trading update.
Gross premium written for the Zimbabwe Life and Pensions
business increased by 187 percent to $142.3 million compared to m $49.7 million
from prior year.
“Fairly strong and active participation by existing clients
in reviewing their current premiums and our focus on writing USD new business
has helped to sustain the good performance for this business over the five
months,” the company said. Herald
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