Accounting and auditing firm, PricewaterhouseCoopers, is to sell a portion of the loans of the two collapsed banks, UT Bank and Capital Bank, to debt recovery and collection agencies.
The agencies will pay a fraction of the principal and interest of the loans to PwC and subsequently collect them from the various debtors.
Consequently, the firm, which was appointed receiver after the revocation of the banks’ licences, has invited interested and qualified institutions to apply for an opportunity to buy the loans.
A Partner and Deals Leaders at PwC, Mr Eric Nana Nipa, told the GRAPHIC BUSINESS in an e-mail response that the loans to be released were “varied and include personal loans, staff loans, mortgage loans, overdraft facilities and term loans for business purposes.”
He, however, declined to mention the face value of the loans in question except to say “we are looking to recover full value (principal plus interest) to the extent possible.”
Interested institutions are to pay the agreed price for the loans upfront and then hope that they can recover them from the various debtors.
It is expected that the money realised from the sale of the loans will help in the liquidation process of the two defunct banks, whose licences were withdrawn in August last year after they were each found to be heavily illiquid and deficient in capital.
The Managing Partner of Oak and Wuuds Law, Mr Bernard Owusu-Twumasi, however, said in a separate interview that PwC’s ability to attract interest from debt recovery and collection agencies for the exercise would be dependent on “how cheap they are ready to sell the loans.”
“If indeed they want to sell, then they should really come very low else nobody will buy,” said Mr Owusu-Twumasi, whose firm is in the debt recovery and collection business and has working experience with almost all the banks in the country.
“For us, if they come to about five to 10 per cent, I will express interest but if they are going to mention the 20 and 30 per cent, then I will not be interested,” he said.
He was confident that any debt collection and recovery agency that buys the loans in the range of between 20 and 30 per cent would make a loss, given that majority of such loans would be difficult to recover.
Mr Owusu-Twumasi said debt recovery in the country was generally a Herculean task, with most debtors making up their minds not to repay.
Unfortunately, however, he said some creditors often demanded high prices for their loans, making it difficult for debt recovery agencies to make good margins.
In the case of the two banks, he said the issue had even been worsened by their collapse.
“Normally, buying a loan is always a ratio of 100 to one such that if I am to collect GH¢100 for you, then I should pay you one cedi but Ghanaian debtors do not want to hear that.
“In this case (PwC’s sale of the loans of UT Bank and Capital Bank), it is even worse because once those owing hear that the banks have collapsed, the possibility of paying is very minimal,” he added.
He said the highest discount someone would ever pay for a loan was between five to 10 per cent, after due diligence had showed that the loans in question were collectable.
On the nature of institutions that the firm was expected to shortlist for the exercise, Mr Nipa said, “it is limited to financial institutions and other institutions that have a proven track record in this kind of transaction – debt assignment.”
Mr Nipa explained that following PwC’s appointment as the receiver, the firm set out a four-pronged strategy that it intended to use to recover loans on the books of the erstwhile banks.
The strategies, he said, included setting off loan accounts from defaulting borrowers with deposit accounts, assignment of loans to credible financial institutions and other institutions in the business of assignment, direct negotiations with borrowers and farming out loan stock to loan recovery agencies, including lawyers.
Under the option of assignment, he said, the firm had decided to invite expressions of interest from qualified institutions as a first step to recovering the loans.
“The assignment will cover all the loan accounts of the two banks in receivership”, he said.