Message from the CEO - Update on Latest Developments
3rd February 2021
Dear Valued Shareholders,
Following our communication during December, and as we have previously promised to keep you updated with the latest developments and actions, we are writing to you today to update you on the latest news related to your investment with Venture Capital Bank (VCBank).
We are pleased to report on the progress we have made during the first month of year 2021 on the plans we have described to you in the latest AGM/EGM to restructure and clean up VCBank’s balance sheet, exit legacy investment and establish a new business model as an investment company:
- With respect to restructuring our debts, as discussed previously, and pursuant to a Letter of Intent signed with our largest creditor in June 2020, VCBank has finalized the agreements to settle its USD 70.7mn Wakala obligations and is expecting execution of the documents imminently. The debt obligation will be settled in-kind through transfer of various investment assets which will result in a cleaner and stronger balance sheet for VCBank.
- In order to further clean up its balance sheet, VCBank has decided to take USD 6.1 mm of provisions against certain corporate guarantees issued by the Bank related to its JAFCCO investment. These provisions are included in VCBank’s Q1 (30 September 2020) financial results, published this week, and comprise the vast bulk of the reported net loss of USD 8.7mn for the period, yielding an ending shareholders’ equity of USD 13.5mn. No other significant valuation adjustments or provisions were taken on other investments during this period. We would also like to confirm here that we are continuing with further attempts to save the JAFFCO investment and should that happen, a large portion of the provisions could be reversed. However, as part of our prudent approach we would like to safeguard the institute from any instability in its standing.
- Regarding exits and cleaning up of legacy investments:
- VCBank has executed an agreement earlier this week to sell a 20% stake in QCon (for 100% of the company), including the 4.61% owned by VCBank. A 15% down payment is payable upon signing, with the remaining payable within 30 days, collectible upon the completion of the share transfer in Qatar. A remaining 7.27% stake, all held by VCBank clients.
- VCBank is also in advanced discussions with financing sources on a restructuring of Liquidity Program I, in accordance with a plan approved in principal by the CBB, that will resolve many client issues in this program.
Moving forward, VCBank is continuing to take active steps to improve profitability, shore up the Bank’s capital base and address the JAFCCO and other legacy situations in order to provide financial stability against any further provisions and position the Bank to return to growth. More specifically:
- VCBank is planning a modest capital increase in which shareholders will have the option of participating in cash or in kind, by way of contributing investment positions they have with VCBank to maintain their percentage shareholdings in the Bank
- VCBank is in advanced stages of further exits that it expects to announce shortly that will generate significant cash for VCBank.
- In addition to receiving its share of the sale proceeds listed above, VCBank has the opportunity to recover certain expenses it paid on behalf of the project companies, as well as collect investment management fees to a certain degree.
With our debt restructuring process close to completion, the license conversion process at an advanced stage, and a healthy pipeline of income-yielding deals, We look forward to VCBank being able to restart its investment activities in the medium term, thereby generating revenue and cash flow, and returning to profitability.
In conclusion, I wish to express the Board’s sincere appreciation for your continued patience, understanding, loyalty and support. Please rest assured of our enduring commitment to act always with the best interests of the Bank’s stakeholders in mind.
Robert C. Wages
Chief Executive Officer
And Head of Investment and Post Acquisition