Merlin looks to creditors for capital?

Thulani Ndlovu Business Correspondent
MERLIN is struggling to attract investors to inject capital and kick start its operations prompting the judicial manager to contemplate requesting the creditors to fund the resuscitation of the company under a scheme of arrangement that will remove the company from judicial management. The scheme of arrangement allows for the participation of creditors in the running of the company and most importantly creditors can pool resources to fund the capital needs of the company.

In an interview with Sunday Business, Merlin provisional judicial manager Dr Cecil Madondo of Tudor House Consultants said the company owed a number of financial institutions who have the financial muscle to inject capital into the business.

“Under this arrangement the company will be removed from judicial management and an order for removal of company from judicial management sought in terms of Section 314 of the Companies Act,” said Dr Madondo.

However, Dr Madondo said in the meantime he was engaged with unnamed three potential investors who were interested in investing in the company.
“One of the investors visited the plant towards the end of last year and they are finalising their due diligence,” he said. “The other investors are from outside country and they are currently carrying out their due diligence. We anticipate to have completed the process before the end of March 2015 hence we will update you on the progress thereof.”

He disputed accusations that the company was failing to attract investors due to his incompetence alleging that when that company was placed under judicial management it was already closed.

Said Dr Madondo: “We believe that is the main reason the company is failing to attract investment. Most of the machinery requires expensive spare parts from outside the country hence not easily accessible. Hence it is very difficult to convince an investor to invest into a closed company as the risk is very high unlike when a company is up and running only requiring working capital to fund operations.”

He added that the powers of the provisional judicial manager were limited in terms of Section 303 of the Companies Act (Chapter 24:03) hence it was difficult to enter into binding agreements with investors before being confirmed as the final judicial manager.

Dr Madondo said he had also received a letter from the shareholders informing him about potential Japanese investors.
“According to a letter received from the shareholders and to several articles that appeared in the newspapers the shareholders have identified a Japanese investor company that is interested in investing in Merlin,” he said.

“The Japanese investors were expected during the beginning of this year and we assume they are on their way. According to the shareholders the investors will bring new state of the art machinery to Merlin to replace the old machinery currently at Merlin.”

“Merlin doors are open to anyone who wants to bring his/her investors for the benefit of all stakeholders. The Judicial Manager is willing to work with the shareholders, creditors and other stakeholders to revive the company.”

However, in a letter to the shareholders legal practitioners Messrs Majoko and Majoko, Dr Madondo reminded the shareholders that he was still in charge of resuscitating the operations of Merlin and he should be consulted before decisions regarding Merlin are taken.

“The Japanese investors are welcome to tour the plant and carry out their due diligence. However, we request that we be advised of the exact dates they wish to visit to enable us to make arrangements with the security at Merlin to expect your visit and to ensure that our representatives are present,” said Dr Madondo.

“Shareholders involvement in the operations of a company under judicial management is defined in terms of Section 306 (h) and (g) of the Companies Act. However, in other assignments we have allowed shareholders to participate in the turnaround of the companies as long as their contributions are in the best interests of the company and its stakeholders.

“Authorities elsewhere have stressed that it is our mandate as the judicial manager to restore the company to being a successful concern and as such we should be allowed to run the operations of the company as smooth as possible,” he summed.