Chronicle Editor
Martin Kadzere: Senior Business Reporter
DAVID Whitehead Textile Ltd, once the country’s largest garment manufacturer has recommended for a debt to equity swap to curtail the company’s huge debt burden.In a statutory report to shareholders, judicial manager Mr Knowledge Hofisi said while the arrangement will not result in immediate cash injection in David Whitehead, it will make it easier for the company to borrow using the restructured balance sheet.
As at November 30, 2016, total creditors amounted to $13 million, largely constituted by employees outstanding allowances. Total assets stood at $16 million. Mr Hofisi is expected to present his report today for consideration by creditors and shareholders.
“This measure does not result in immediate cash-flow benefits to the creditors or the company,” said Mr Hofisi.
“Cash-flows of DWTL can improve if the company can borrow using the restructured statement of financial position or using the same to attract a new investor who then injects fresh capital. It is beneficial to run the company so that jobs will be secured, employees earn salaries and wages and creditors be paid.”
DWTL, formerly listed on the Zimbabwe Stock Exchange, was placed under provisional judicial management in December 2010 before confirmation of the final order in March 2015.
The company used to produce about 20 million metres of fabric per year while directly employing 3 000 workers and thousands in down and upstream industries.Mr Hofisi noted that top shareholders of the company were individuals whose capacity to inject capital “is doubtful” unless an institutional investor was brought on board.
“The same argument would remain valid even if a scheme of arrangement was to be implemented in future, the shareholders of DWTL would still require an institutional investor who has the capacity to inject fresh capital into the business,” he added.
On operations, Mr Hofisi said the company’s resuscitation had been stalled by lack of funds.
Following the completion of care and maintenance in January 2015, partial resumption of operations started a month later. Funds that had been mobilised mainly from the disposal of non-core assets were used to finance working capital requirements.
“Creditors and members will remember that the judicial manager obtained consent to dispose of non-core assets in conformity with the requirements of section 307 of the Act and final order placing DWTL under judicial management.
“It is against this background that the judicial manager sold three residential properties in Gweru, a commercial stand and two other residential properties in Kadoma,” he said.
To attain amicable closure and avert loss through litigation, the other part forming the Strong Weave in Harare, a Deed of Settlement was reached with National Blankets Limited resulting in the proceeds from the sale of Strong Weave being shared equally between DWTL and National Blankets Limited. Due to the depressed economic situation, not more than $600 000 was realised from the disposal of non-core assets.
Mr Hofisi said at the time of partial resumption of operations, the company received tremendous support from the private sector and quasi-Governmental entities.
However, some of the customers were taking long to pay due to the liquidity challenges in the economy. Mr Hofisi, however, said the company was “cautiously optimistic” that DWTL would secure a facility worth about $2 million during the first quarter of 2017.
“Negotiations with the principals have reached an advanced stage. It is expected that upon procurement of the facility, the company will immediately resume operations. Efforts are (also) being made to recover trade receivables in the sum of $160 000.”
During the period under review, power was disconnected owing to non-payment.
Negotiations for the restoration of power are in progress and should come to fruition upon payment by trade debtors or receipt of the $2 million, said Mr Hofisi.
At the same time, management was working on several initiatives, including engaging suppliers of critical raw materials such as cotton lint, dyes and chemicals and coal.
“The company will, upon resumption of operations in early 2017, seek to consolidate its position on both the local and export markets as the facility that DWTL will receive is earmarked to promote export orders. In the medium to long term, it will be necessary to retool by acquiring new machinery but carefully managing debt levels.”
He said the management was engaged with negotiations with a Japanese vendor for the supply of new textile equipment although the process was taking long to finalise.
Online Reporter