Tycoon Nicholas van Hoogstraten under probe for insider trading

CFI HOLDINGS, which was suspended from the Zimbabwe Stock Exchange on January 29, 2016, continues to flirt with controversy following revelations by its second-largest shareholder, Mr Nicholas van Hoogstraten, that the company is technically insolvent.


And in yet another twist to the saga, Mr van Hoogstraten himself is being probed by the ZSE for allegedly purchasing the company’s shares at a time when it was in a closed period.
CFI was suspending from trading for failure to publish its financials for the year ended September 30, 2015 despite being granted permission to report them a month after the deadline.
Documents at hand indicate that management pleaded with the ZSE to be allowed to release the results by January 31, 2016, which was granted.
But the company failed to meet that new deadline.
Attempts to get another extension to March 31, 2016 failed.
Listed companies are supposed to report their earnings within three months of their half-year or year-end trading period.
Mr van Hoogstraten, who has a 21,6 percent holding in CFI through Messina Investments, however contends that the company is reluctant to show the market that it is insolvent.
“The company is insolvent,” he said, adding: “The auditors need to qualify the accounts, which will show the company is insolvent.
“Why wouldn’t they publish the accounts? Why are they trying to avoid the inevitable? These are just delaying tactics.”
Curiously, CFI has written to the ZSE advising that its three major shareholders — Zimre Holdings Ltd (28,2 percent), Messina Investments and NSSA (12,9 percent) — are backing a US$10 million re- capitalisation plan. Through the plan, Zimre is expected to inject US$4,49 million, Messina Investments US$3,44 million and the National Social Security Authority US$2,05 million.
“The group is working on a scheme of arrangement in its efforts to address the group’s recapitalisation.
‘‘The directors believe that the publication of unaudited results may cause unwarranted alarm as to derail recapitalisation efforts underway as engagement of creditors has just commenced,” said CFI Holdings Ltd in a letter dated January 22, 2016.
Mr van Hoogstraten, however, professed ignorance on the existence of the plan, claiming instead that injecting more money into the business was unhelpful as long as the current management remained in place.
But despite his stated misgivings with the present management, Mr van Hoogstraten has been ramping up his shareholding in the business.
It is understood that on January 21, 2015, he purchased 3,3 million CFI shares for US$165 000 through Messina Investments.
That deal has attracted the interest of authorities at ZSE as it could have breached certain sections of the bourse’s listing rules, particularly on insider trading.
Insider trading occurs when individuals with access to privileged information concerning a publicly listed company use that information to trade in the company’s shares before that information is made public.
“It appears that the buyer is also one of the parties cited to participate in the recapitalisation. However, the parties are not directors, and therefore, ZSE reported the incident for further consideration by the Commission in light of the proposed recapitalisation transaction and the 2015 audited results that have not been released by the issuer,” said a source privy to the goings-on.
CFI’s proposed scheme of arrangement — managed by accountants Grant Thornton – hinges on two phases: recapitalisation and disposal of non-core assets.
According to a November 27, 2015 letter to its creditors, CFI Holdings Ltd said it planned to offload US$19 million worth of assets.
It said prospective buyers for properties valued at US$11 million had already been secured.
“The board believes that a scheme of arrangement with the group’s creditors is now the missing link to completing the full turnaround.
“The shareholders are requesting for your support to afford the business a stay of execution and litigation…” read the letter.
CFI Holdings Ltd is saddled with a huge debt overhang.
Last year it swapped its 834-hectare Langford Estate in Harare for the cancellation of a US$16 million debt to Fidelity Life.-Sunday Mail