Economy

Credit Suisse Dumps Finance Bank Shares

In what may be seen as a sign of collapsing confidence in local financier Rajan Mahtani, Credit Suisse has dumped a 25% stake in Finance Bank of Zambia Limited (FBZL), reducing their shareholding in the company to 15% from its former “strategic stake” of 40%.

The dumping of such a large portion of shares just weeks before Finance Bank was expected to launch an Initial Public Offer (IPO) on the Lusaka Stock Exchange (LuSE) raises a number of questions regarding the unusual arrangement reached between the two institutions, as well as ongoing concerns regarding the bank’s compliance under the Banking and Financial Services Act (BFSA).

According to information published on the Finance Bank website, the current shareholding of the bank is distributed as follows: 25% held by Clarkwell Limited, 25% held by Finsbury Investments Limited, 25% held by Rajan L. Mahtani, 15% held by Credit Suisse Investments (Nederland) BV, 6.5% by Job Albert T. Samuel, 2.5% by the Estate of the Late Pat Bwalya Puta, and 1% by Patrick S. Chamunda.

The key difference in the shareholding structure is Mahtani’s personal stake of 25%, which is assumed to have been absorbed from Credit Suisse.

When contacted regarding the transfer of this 25% stake in Finance Bank, a Credit Suisse public relations representative issued an “official no comment” on the transaction.

The Credit Suisse shareholding in Finance Bank was originally announced back in April 2008. According to a press release at the time, Finance Bank Chairman Mahtani said that “Together with our colleagues at Credit Suisse, we will also explore the opportunity to simultaneously list Finance Bank Zambia on the London and Johannesburg Stock Exchanges.”

The promised listings from seven years ago never came to pass, however.

At the end of 2010, the Bank of Zambia (BoZ) intervened to suspend shareholder interests in Finance Bank after an investigation found numerous cases of money laundering, fraud, and violations of the BFSA, in particular the fact that Mr. Mahtani had unlawfully exceeded the maximum shareholding of by an individual by possessing more than 25% through nominees.

Credit Suisse as a strategic shareholder of 40% of the bank never took any legal action to protest the liquidation or seek to recover damages.

According to a leaked forensic audit of the bank’s shareholdings from the firm Edward Nathan Sonnenberg published on Zambian Watchdog, there were concerns not only that Mahtani actually owned more than 56% of the bank through false fronts, but also that the Credit Suisse “investment” was actually a loan disguised as an equity transaction.

The auditors were alarmed by a “Put and Call Option Deed” attached to the Credit Suisse stake, which means that not only has the bank mysteriously declined to receive dividends since 2008, but also that Credit Suisse would be guaranteed a 17% return on its investment from the IPO (whether the listing took place or not – and it now appears to be cancelled).

The ENS auditors wrote, “A possible explanation for the guarantee provided by Dr Mahtani is that the entire Credit Suisse transaction may simply have been a loan of USD 80 million which was secured via an elaborate sale of shares agreement. The security for the loan takes the form of the equity stake.”

If Credit Suisse had retained its 40% stake in Finance Bank, then in theory according to the deal, the rumoured IPO listing would figure to be a $13.6 million pay day – but instead they opted to dump shares.

So given the unusual conditions attached to the Credit Suisse stake, either Mahtani had asked to buy them out, or Credit Suisse made the banker absorb the shares as part of an unwinding of the arrangement. In an environment of increasing Know Your Client (KYC) regulations placed on banks, Credit Suisse could in theory be preparing to limit its exposure to an individual known to be tied to numerous money laundering allegations.

According to one financial analyst who spoke to us on background, Credit Suisse could be working its way out of a deal that offers no benefit to them, especially considering that Mr. Mahtani could be facing criminal liability as part of the corruption tribunal taking place against the Director of Public Prosecutions Mutembo Nchito, who was responsible for issuing nolle prosequis in many of Mahtani’s criminal cases. The current Finance Minister Alexander Chikwanda has made statements alluding the illegal standing of the bank on court record:  “There are two things, his bank has continually and persistently and consistently breached the conditions of the Banking and Financial Services Act (…) It can put me in a moral conflict to allow other banks to conform to the provisions of the Banking and Financial Services Act while Mahtani gets out.”

The issue of the listing of Finance Bank IPO on the LuSE by the end of March has been subject to conflicting reports. Earlier this week, Zambia Reports cited reports by Zambian Eye that the Mahtani was pulling Finance Bank from the listing. Then on March 9, representatives of Mr Mahtani published a denial, insisting that the listing was on course. This was followed on March 10 by another publication on a Mahtani-owned website entitled “Finance Bank and Zambia will have to wait, Dr Rajan Mahtani Saves Thousands.” The article quoted Mahtani as saying that he was sorry to disappoint by cancelling the Finance Bank listing, but that due to the “volatile nature of the stock market” they had to cancel the listing, thereby he would be “saving thousands of local investors” from losses.

The article announcing the cancellation of the IPO was promptly removed from the website, but a cached image of the headline is below:

mahtani-cancels-ipo

17 Comments

  1. Nsimbi

    As soon as Zambia deals with this Rajan, the better … the epitome of corruption!

    • Joan Craven

      Lungu does not have balls to touch Dr. Mahtani. He is a vicious wolf, no compromised President ever dares to cross him. If Lungu has the guts let him try.

      • Chief Puta

        I wants to buy 100 shares and as a shareholder question in AGM. Don’t deprive me of this opportunity. I want to undress this Indian Money Launderer in public.

      • baldwin

        chiluba and kk both threw him in jail LPM revived him because of Maleen Kakubko HH

  2. Ghost

    Mahtani has harmed many and if Mr. Lungu is ready to finish him off, here are the facts. (1) Clarkwell Limited is 100% owned by Mahtani. It is a shell company registered in British Virgin island. (2)Job Albert Thiagaraj Samuel has never ever attended any board meeting, has never been paid any dividend and has never been sent a notice of shareholders’ meetings or otherwise. He has never filed any tax return in Zambia and Canada for receiving dividend or owning shares in the bank. (3) Finsbury Investment is Mahtani’s company. (4) Mahtani himself is Mahtani. As per records (excluding Credit Suisse’s 15%) Mahtani owns Finance Bank to the tune of 81.5%. The only genuine shareholders are late Mr. Puta and Mr. Chamunda to the tune of 3.5%. The original transaction after buying off of Mr. Nizam’s interest in the bank was 6.5% for Mr. Samuel, 2.5% for Mr. Puta and 1.5% for Mr. Chamunda. These 3 owned 10% of the bank and Mahtani owned 90%. Mahtani then bought off Mr. Samuel’s interest (for a song, exploiting the old Sri Lankan man). In effect Mahtani owns Finance Bank 96.5%. BOZ shall move in and ask British Government to investigate the money laundering transaction and holding of 25% shares by Clarkwell. Even without that, Mahtani has by his own confession has dug his grave. He owns 50% directly (Finsbury Investment and Mahtani) and 6.5% in an ex-employee’s name. BOZ shall contact Canadian government to establish tax status of Mr. Samuel for hiding dividend declared by Finance Bank and he will reveal the truth. Mr. Nizam, the first Chief Executive Officer of Finance Bank, and his friends from the bank are still around in Zambia, London and Dhaka to disclose the truth on shareholding.
    It is now or never to nail the Mahtani Money Launderer.

  3. Fina bury

    ww.zambianwatchdog.com/wp-content/uploads/2012/11/FBZ-shareholding-report_10.6.10.pdf

  4. Righttoreply

    Zambians are petty jealous. They do work but are jealous of foreigners.

    • shaka

      I we ur a kawalala Zambians are not jealous of foreigners

  5. Buck Teeth Lungu

    Chikwanda acknowledged on tape held by the Post last year that Mahtani has breached Zambia’s Banking and Financial Services Act. Sata ignored that illegality and handed the bank back to Mahtani. Lungu should act now that he is president against this Indian crook.

    • Hoppy

      I concur with you @Buck Teeth Lingu, except that we shall be respectful to our elders and President. God has made us in his own image and shall not make fun of anybody for his shape and features. God wanted that person in that form. We shall praise the Lord.

  6. wila

    I’m still saying Let God arise,Dr s a child of God upon confession of his sins, watch yr God arise

  7. wila

    Have just checked with Mary and Gabriel schultz, none of thm Hv commented on the subject of credit Swissie

  8. wila

    How come someone s purporting to be them submitting comments on the subject, Mrs Craven is equally on ship at the moment, Wat lies is all this about? Whatever the motive ths is not right, Let’s do unto others that which you would want done to you,

  9. wila

    Meant Suisse

  10. abene ba nyekese

    Our President must fight hard to ensure our dues benefit Zambians. Post must also give back what is ours.

    Mathani needs a comission of inquire to fish out laundering issues. You never know these could be at play on high foreign exchange.

  11. kalampa 4 lyf

    Thot Mathani z a clean businessman bt hez jst like his friends in high authority.Thoz shielding him must know that their time z up.We dnt want dem mafiaso in Zambia.

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