CBZ seeks to recover US$600k debt as tobacco firm goes bust

Fidelis Munyoro Chief Court Reporter
CBZ Bank has lost US$600 000 after a tobacco auction floor it advanced the money as an overdraft facility went into liquidation before it settled the debt. The overdraft facility extended to Millennium Tobacco Auction Floors (Private) Limited in June last year was meant to finance the company’s cash flow mismatch.

MTAF failed to honour its obligations and the arrears have since risen to US$801 128 because of interest.
CBZ has since instructed their lawyer Mr Obert Gutu of Gutu and Chikowero Law Chambers to recover the debt.

This week, Mr Gutu submitted his client’s claim to MTAF’s liquidator, Mr Winsley Militala of Petwin Executor Services, to act on the matter.
“We are informed that you are the executor of Millennium Tobacco Floors (Private) Limited which is presently under liquidation,” said Mr Gutu in a letter dated March 4 2014.

“Millennium Tobacco Floors (Private) Limited owes our client the sum of eight hundred and one thousand one hundred twenty eight dollars (US$801 128,00) arising out of an outstanding balance on an overdraft facility extended to Millennium Tobacco Floor (Private) Limited.”

Mr Gutu advised Mr Militala that the overdraft facility attracted 28 percent interest per annum.
Mr Militala yesterday confirmed that he was appointed provisional liquidator of MTAF.

“I can confirm that I am the provisional liquidator of that company and as far as CBZ claim is concerned, I am yet to have sight of it since I have been out of office much of this week,” he said.

MTAF had been technically insolvent since November 2012 and was facing liquidation when it approached CBZ the following year seeking an overdraft facility to recapitalise.

At the time the company was in its third year of operation, but still facing viability constraints as its liabilities at US$4,3 million outstripped assets at US$1,8 million.

MTAF is linked to former shareholders of the Zimbabwe Tobacco Auction Centre which folded under similar circumstances.
According to an MTAF financial statement, as at October 2012 the shareholders had never injected capital into the business and relied on borrowings to finance operations.

The liabilities stood at US$4,2 million made up of creditors who are owed US$3,1 million and a bank overdraft of US$1,2 million.