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Tetrad battles shareholders’ revolt

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IN a bid to contain a growing shareholders’ revolt, the defunct Tetrad Investment Bank (TIB) — taken over by depositors eight years ago through a debt-to-equity arrangement — is dragging Bard Santner Investors (Pvt) Ltd (BSI) to court to prevent the asset management company from engaging the disgruntled stakeholders.

BERNARD MPOFU

Through its lawyers, Gill, Godlonton & Gerrans, TIB and The Trustees of the Vincent Trust filed an urgent chamber application for an interdict against BSI at the High Court in Harare on Friday. TIB and the trustees are the applicants, while BSI is the respondent.

This comes amid a heated row between TIB shareholders and directors for the control of the closed financial institution’s US$13 million assets portfolio. Shareholders led by Jackie Levey and Dimitri Divaris are battling it out with directors led by Andre Lourenco Vermaak and trustees such as John Pybus.

Since 30 October 2018, a five-member board led by economist Dr Appollinaire Ndorukwigira, who is the acting chairperson, has been running the affairs of the bank. The bank is now owned by its shareholders, not Tetrad Holdings as used to be the case before the debt-to-equity scheme of arrangement.

In its application, TIB and its trustees say they have “reasonable apprehension” that BSI has certain information about shareholders as a result of “data breaches”  that could cause “irreparable harm” to their business interests.

“The First Applicant (TIB) has a reasonable apprehension of irreparable harm arising from certain data breaches relating to the information that it is in possession of,” the court application says.

“The second applicant (The Trustees of the Vincent Trust) being the data subject concerned has an equal apprehension of irreparable harm arising from the aforesaid data breach.

 “The respondent (BSI) has been, since the beginning of the month, using the aforesaid personal information, in particular the e-mail addresses and telephone numbers to contact the first respondent (TIB)’s shareholders seeking from them their authorisation to take over management of their shareholding in the first respondent (TIB).

“Even though it is apparent that its actions are unlawful, the respondent (BSI) has refused to make an undertaking to cease the unlawful processing of the personal information that it obtained from the first applicant (TIB)’s database. The first applicant (TIB) will suffer serious reputational damage unless the unlawful actions of the respondent are immediately arrested.”

Prior to this, TIB had written BSI a letter dated 6 October 2022 demanding that it cease interacting with its shareholders. However, BSI had replied on 10 October, saying it had done nothing wrong in engaging TIB shareholders as that is precisely why it exists, and thus its action posed no harm to anyone at all.

 “This interaction between our client (BSI) and the said shareholders poses no harm to either your clients or anyone,” Everson Samkange of Samkange Hungwe Attorneys wrote in reply.

 A banking sector executive said: “It’s strange that Tetrad Bank directors are trying to tell shareholders what to do with their investments. Shareholders are free to act in their best interest, and approaching an asset management firm to try to see how to unlock value since they haven’t received a return on investment for eight years can’t be said to be unlawful, let alone that it may cause irreparable harm. The real question here is: What are the bank directors trying to hide or afraid of?”

 Shareholders interviewed say they have not received any return on investment since they took over the bank eight years ago.

This has sparked fierce confrontation between directors, who are operating effectively as management, and the shareholders whose money is tied in the bank without a return for years now.

The revolt by shareholders has been specifically triggered by BSI’s takeover of private clients’ portfolio from TFS Management Company, which is under liquidation, last month.

BSI is a subsidiary of Bard Santner Markets Inc, a new Harare-based financial advisory services firm offering a wide range of products to clients to unlock value in their investments, especially dormant or defunct assets.

As part of its consolidation process, BSI  took over Tetrad’s managed clients portfolio after reaching an agreement with the liquidator. Some of BSI clients under the arrangement are also shareholders in TIB,  hence their interest in the bank’s affairs.

 That is why they approached the asset management firm for help. After reading about BSI’s takeover of TFS Management Company’s managed clients portfolio in the media, some TIB shareholders have been flooding the new asset management company seeking help on numerous problems.

This has fuelled a shareholders’ revolt at TIB, which directors are battling with as it spins out of control. The court action is more about containing shareholders than restraining BSI.

Against this backdrop, a host of minority shareholders are now increasingly growing impatient with the TIB board of directors running the bank’s affairs, including managing its nearly US$13 million property portfolio from which it collects rentals and leverages it for other financial benefits.

Information gathered shows that shareholders are worried and fretting that they have gone for eight years without receiving a return on investment.

 Besides lack of return on investment, the shareholders are complaining about lack of audited financial accounts.

Shareholders have not received audited financial accounts for the past three years. The last financials they received were qualified statements for 2018 which only came in 2022.

 The other big issue troubling shareholders is the impression that management or directors are benefitting from the bank’s diversified property portfolio from which they are receiving rentals.

Shareholders are also disgruntled because the directors have made a series of empty promises on purported takeovers and capital injection which have not materialised, including the fake story of Russians coming a few years ago.

The other issue arising is that some of the shareholders are mainly old people. As a result, some of them have died without benefitting anything from their investments.

 Yet shareholders say there is no sense of urgency on the part of management or directors who are fully aware of the demographics, particularly age, of the shareholders who need the money the most now in the twilight of their lives.

 To make matters worse, there has also been a communication drought from management or directors to shareholders. Some of the agitated shareholders have spoken out against the current untenable situation.

Levey, Sakuma Trading director, says her company, which was engaged by TIB to mobilise deposits and investment funds, has a property portfolio and loans worth US$5.3 million when the group, including the bank, was placed under judicial management.

 “TIB directors are running scared now because for the first time they have got not just little old Jackie Levey and Sakuma trading gunning for them, but also influential shareholders. They are facing guys who have got more power and influence, and a stable asset management company will to help. The problem is that they are the only ones making money from the current situation; so they don’t want to lose it. That’s why they are being defensive. I stood up at the last AGM (annual general meeting) and I said on behalf of my clients ‘we don’t have faith in any of you; you are not trustworthy, you do not communicate’ and in the last three weeks they began sending messages because they are panicking. But it’s the first time they have had real serious demands for accountability and return for investment, while shareholders oppose their actions.”

 Another shareholder, Divaris, said: “Before my mother (Kiki Divaris) died, she was opposed to the decision to bring in the new board. Ever since then there has been no communication from them. The story is that these guys have been running the bank carte blanche, that is without accountability and communicating for some years. The promise of prospective buyers or investors has been going on for years, but there is no progress.”

Some of the shareholders chose to speak off the record.

“The bank’s shareholders are disgruntled and in a rebellious mood. The reasons are fairly straightforward. They have received no financial returns for the past eight years,” a well-informed source said.

 “Communication blackout from management — shareholders have not received audited financial accounts for the past three years. The last they received were qualified financial statements for 2018, only in 2022.

“There is also an impression that management or its directors are benefitting, given the fact that the bank has a diversified property portfolio from which it is receiving rent.

“Lack of trust in the directors — past announcement of takeovers and capital injection have not materialised. Fellow shareholders are mainly old people. Some have died. There is no sense of urgency on the part of management who are fully aware of the demographics of the shareholders.”

Instead of dealing with these issues raised by the shareholders, TIB directors have been dismissive of the minority equity stakeholders’ grievances.

They have been defensive and witch-hunting to intimidate shareholders, while targeting the financial advisory services firm, BSI, which has been approached for help. In a letter to shareholders dated 9 September 2023, acting TIB company secretary Judy Conway suggests the bank is more concerned about  distancing itself from a transaction in which BSI took over Tetrad’s managed clients portfolio — and not addressing the real issues.

The letter says the transaction created an impression that TIB is a subsidiary of Tetrad Holdings, which it no longer is although it was before, which is a peripheral matter.

 “The article may have created the impression that Tetrad Investment Bank Limited is in some way associated with the transaction and that it is a subsidiary of Tetrad Holdings,” the letter says.

 “We wish to assure shareholders of Tetrad Bank Investment Limited that the bank has no association with the transaction described in the article, and that TIB is owned by its shareholders and is not a subsidiary of any company mentioned in the article.”

The article in question related to BSI’s takeover of TFS Management Company’s clients portfolio to unlock value for themSmall shareholders are currently grouped and exercise proxy through Tetrad Creditors Group Trust (TCGT) represented by Pybus, a banker.

TCGT has been complaining about shareholders’ approach to BSI for rescue instead of addressing their concerns.

“We wish to bring to your attention an approach being made to other shareholders in respect of their shareholding in Tetrad Investment Bank Limited (TIB),” it wrote to shareholders.

“The TCGT was formed in May 2015 to enable smaller shareholders to have a significant influence as a united body. The number of shares under proxy by the TCGT totalled approximately 54% and enabled the TCGT to vote for and support a management policy to recover and consolidate the assets of TIB,” TCTG said.

“Since the TCGT commenced an active interest in the management of TIB through its substantial consolidated voting position with effect from 31st October 2018, it has effectively appointed directors and an executive team with professional skills.

“As a result, TIB has been turned around from making losses in 2018 to a break-even position. Over the past four years, debtors have been collected, previously encumbered property is unencumbered, property yields significantly improved, all material liabilities repaid or settled, assets recovered and (two) of the outstanding statutory audits have finally been completed and the remaining (three), to 30 September 2021 are all due to be completed by 31 October 2022. As a result of this value enhancement, the bank is now in a position to plan its future path.”

While conceding the shareholders have a right to choose who to work with, TCGT resorted to scare tactics. “Shareholders are entitled to select their proxy and TCGT will not stand in the way of shareholders who wish to assume their voting rights,” it said.

“We only warn that this action will reduce a shareholder to an un-influential participant in the future of the bank and the disposal of its assets. This is the very condition which the TCGT was formed to prevent. Unless a sufficient level of shareholders continue to support the role of the TCGT, it is unlikely to achieve the same level of success that it has to date.”

TIB directors have also written a letter to BIS and issued a public statement warning shareholders against engaging the asset management firm.

They said BIS should desist from talking to the shareholders. However, Bard Santner Markets Inc lawyers dismissed TIB’s accusations as baseless, saying the asset management firm has only engaged its own clients with vested interests in the bank as well as shareholders who have made enquiries or been referred to them by others.

 Contacted for comment, TIB director Harry Orphanides said there is now confusion over the situation.

 “There seems to be a lot of confusion here and I’m due to meet with our attorneys to get the issue resolved. Bard has no authorisation to deal with the bank. Bard was dealing with the issues of TFS. Yes we do have a problem in that the shareholders were never informed that Bard was going to take over this portfolio and I have a problem with that.”

 Asked why the board is not communicating with TIB shareholders, Orpahnides said:  “The bank deals with shareholders of Tetrad, it’s a total separate entity; they have got nothing to do with TFS, which was put under judicial management and is a separate company to the bank. The board represents Tetrad Investment Bank.”

 Bard chief executive Senziwani Sikhosana spiritedly defended his clients who are also bank shareholders, and those who are not, saying they have done nothing wrong in engaging investors as they only want to get a return on their investments.

“Some of our clients are shareholders in Tetrad Investment Bank. Through them, other minority shareholders have reached out to us for help. As a result, we want to know how their investment portfolios are performing. That’s why we are here. That’s our job. When we act and ask questions on behalf of our clients, we expect answers whether the company is listed or unlisted; not stonewalling, intimidation or scare tactics.

“Our clients expect nothing less than that and so do our regulators. There is no passive investment in our world. We simply want our clients and other shareholders to get a return on their investments. We are open for business to those who want to engage us and we are always ready to help.”

TIB was incorporated on 12 June 1995 as Tetrad Securities Limited. The institution commenced operations in 1996 after obtaining a licence to operate as a discount house in terms of the Banking Act. 

Tetrad Securities Limited’s discount house licence was converted to a merchant banking licence on 6 March 2009.

But TIB’s licence was withdrawn by the Reserve Bank of Zimbabwe in 2014. In 2015, the bank was then placed under provisional liquidation, while it looked for a new investor.  Its liabilities exceeded assets by US$1.5 million.

 Initially, Tetrad Holdings, established in 1995, comprised financial services (a merchant bank, TIB; asset management entity, TFS Management Company; a microfinance unit, Multiridge Finance; and an insurance company, Tobacco Hail Insurance), a mining and mineral resource processing company,

Tetrad Resources; a property development and management company, Tetrad Properties; and other interests. However, when the group closed in 2014 it was broken into different entities.

This left the bank, TIB, in the hands of depositors after a debt-to-equity scheme of arrangement.

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