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Golden Sibanda Senior Business Reporter
David Whitehead Textiles Limited (DWTL) is looking for an investor to inject nearly $31 million needed to acquire a new plant, settle various obligations and procure critical spares, judicial manager Knowledge Hofisi said.
In his report issued on Monday last week Mr Hofisi said it was desirable that $22 million of the fresh capital be foreign currency for the acquisition of factory plant and critical spares, which are of foreign origin.
However, the capital outlay excludes the amount the investor will pay towards the purchase of existing shares, which will be determined by negotiations between the seller, the buyer and a DWTL valuation report.
The investor will be expected to directly inject about $30,5 million into DWTL, which will be utilised for acquisition of a new factory plant for $20 million and procurement of critical spares worth $2 million.
Further, the funds will be used for working capital $1,5 million, acquisition of shares forfeited $1 million and settlement of pre-judicial obligations $6 million, Mr Hofisi said in the judicial manager’s report.
The process of identifying a new investor is currently underway. While one has already been identified through a private treaty, Mr Hofisi said the option of a competitive bidding process remained open.
“If the competitive bidding route is pursued, an invitation for the expression of interest will be flighted in the print media towards the end of 2018,” the judicial manager said in his September report.
The process to identify an investor either through a private treaty or by competitive bidding is expected to be completed by end of the year while receipt and application of fresh funding is to be completed by March 2019. The first phase of plant acquisition is planned for completion by June 2019.
And if the private arrangement with an investor comes to fruition, there may not be need to undertake a competitive bidding process. The investor is expected to acquire significant shareholding.
DWTL is expected to come out of judicial management by August next year, after recapitalisation. Mr Hofisi said the challenges that led to placement of DWTL under judicial management were dissipating.
He said the company had managed to secure $2 million from the Zimbabwe Asset Management Company (Zamco), with 40 percent of the facility used towards acquisition of cotton yarn. The balance, said Mr Hofisi, will be settled using the prevailing legal tender in the country.
About 10 percent of the Zamco facility was used to import critical spares to increase the number of weaving machines in operation with the first batch of the equipment having been received only last month.
The balance was used to meet other obligations such as wages, salaries, electricity, dyes and chemicals.
“As a result of the facility, the company resumed operations in January 2018 with more than 500 000 metres of fabric having been woven to date. About 170 workers are on duty but mainly in the fabric division.”
Mr Hofisi said while the health status of the company had improved, additional funding was needed for the new plant, additional working capital and procurement of more critical spares for the fabric division.
The judicial manager is currently exploring for the new equipment in India, Germany and China. Negotiations for additional funding for working capital and more critical spares will be concluded by year-end.
“The acquisition of new machinery will result in the increment of production capacity by 150 percent from 6 million metres to 15 million metres of fabric per annum, thereby increasing revenue to about $45 million” Mr Hofisi said.
The investment will also enhance DWTL’s competitiveness through improved quality consistencies, higher efficiencies and economies of scale, thereby ensuring DWTL consolidates its market position.
The judicial manager said the company continued to face operational constraints to due to the breakdown of machinery such as the pad steam in the wet process section and a new one will therefore be acquired.
“The acquisition of the new pad steam will result in the company being able to process export grade fabric. Funds earmarked for acquisition of the pad steam have been set aside from the facility and are under the custody of Zamco,” said Mr Hofisi.
Formerly listed on the Zimbabwe Stock Exchange, DWTL was placed under provisional judicial management in December 2010 after facing viability challenges before confirmation of the final order in March 2015.
It was de-listed in 2009 following the acquisition of a controlling stake by Elgate Holdings, which has since been reversed after it failed to pay for the stake. DWTL used to produce 20 million metres of fabric per year while directly employing 3 000 workers and thousands in down and upstream industries.
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