Thursday, 19 August 2021

FIDELITY POLICY HOLDERS STAND TO LOSE US$3OM

FIDELITY Life Assurance Zimbabwe policyholders risk losing about US$30 million if the company’s acquisition of Langford Estates is reversed.

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

0 comments:

Post a Comment