adminassets at US$1,8 million.
Millennium Tobacco is linked to former shareholders of Zimbabwe Tobacco Auction Centre which folded under similar circumstances. With such a state of affairs,
Millennium is unlikely to get an auction licence from the Tobacco Industry and Marketing Board for the next tobacco selling season.
TIMB chief executive Dr Andrew Matibiri said the board has already licensed three companies to auction the crop during the coming marketing season. Boka Tobacco Floors, Tobacco Sales Floor and Premier Tobacco Auction Floor, which operated alongside Millennium last season, have retained their licences.
According to the Millennium financial statement, the company shareholders appear not to have never injected capital into the business and relied on borrowings to finance operations. Current liabilities as at October 31 2012 stood at US$4,2 million made up of creditors owed US$3,1 million and a bank overdraft of US$1,2 million.
Correspondingly the company does not have any assets to match its liabilities. As such the company is unable to pay off its liabilities unless there is a capital injection from the shareholders.
All suppliers have not been paid for more than 120 days, indicating severe cash-flow challenges. Among those owed are statutory bodies such as the National Social Security Authority and the Zimbabwe Revenue Authority. Besides owing big institutions, the firm is failing to pay amounts below US$100.
The financial statement also shows that the company made a loss of US$1 million in its first year of operations and US$1,4 million in 10 months to October this year.
This brings losses to US$2,4 million recorded in its books.
The report is also showing high borrowing levels. The company is heavily borrowed, to the tune of US$1,2 million. The levels of borrowings are not financing anything tangible on the balance sheet. All assets on the balance sheet are non current.
“Millennium has actually committed an act of insolvency. This means the business is a super candidate for liquidation or the other option is to look for an equity partner,” said a source familiar with the developments.
Last Friday, Millennium creditors were supposed to meet to discuss a proposed scheme of arrangement. The meeting did not take place and was rescheduled for yesterday. The details could not be established at the time of going to press.
A scheme of arrangement, or a “scheme of reconstruction” is an agreement between a company and its shareholders or creditors normally used to execute arbitrary changes in the structure of a business and thus are used when a re-organisation cannot be achieved by other means.
They may be used for rescheduling debt, takeovers, and returns on capital, among other purposes. In Zimbabwe, schemes of arrangement are approved by the High Court.
Despite Millennium’s financial distress, an executive said yesterday the company was currently working on meting the requirements to retain its tobacco auctioning licence.
“We are working on the canteen area, toilets, bathrooms and accommodation for farmers. We would want to improve our facilities and I hope by beginning of the tobacco selling season, we would have been issued with a licence,” Millennium executive Mr Thomas Nherera said in an interview.
leeroy