New broom at David Whitehead

Provisional judicial manager Mr Winsley Militala had recommended the company be placed under liquidation after failing to raise working capital to revive operations and secure strategic investors.

Formerly owned by Lonrho plc, before a management buyout in 2001, led by former chief executive Mr Edwin Chimanye, the company has three main plants in Chegutu, Kadoma and Gweru.

Elgate Investments is the majority shareholder with 51 percent, but the ownership is being disputed. Mr Chimanye is the second largest shareholder with 12,14 percent while the remainder is owned by minorities.

Mr Hofisi’s rescue plan received substantial support from the majority of creditors and shareholders who then voted for the final judicial management. Creditors owed about US$6,5 million voted for final judicial management which represented 56 percent of the vote, while 46 percent with total claims of about US$5,5 million voted for liquidation. Shareholders with 590 million shares or 75 percent of the issued share capital voted for final judicial management.

The firm was, for the second time, placed under judicial management in December 2010, having gone through the same reconstruction between 2005 and 2008 under Dr Cecil Madondo of Tudor House Consultancy.

“Indeed, the certificate (of appointment) has been procured today,” said Mr Hofisi in an interview.
“Therefore, considering that DWTL is a strategic national asset, an in-depth stakeholders’ analysis is a prerequisite.

“At the same time, a management committee that will function like a board of directors will be established to provide strategic direction.

“Two former CEOs of DWTL will be appointed, including a chartered accountant and a lawyer, among other technocrats. All in all, a holistic approach is required,” he said.

Mr Hofisi is not new to David Whitehead affairs. He was a consultant during the tenure of Dr Madondo.

One of the key shareholders said liquidation was not an “option”. Aurifin Capital rescue plan logged with the High Court premised on conversion of debt into equity, disposal of non-core assets to raise working capital and restart factories, as well as bringing in a strategic partner.

According to the plan, Aurifin is proposing “a scheme of compromise” to avoid liquidation.
The report says workers and other creditors, who are owed about US$8 million, would be persuaded to convert part of their debt into equity, but on condition the company will be subsequently re-listed on the ZSE.

Capital and reserves would increase by US$8 million while liabilities will decrease by the same amount, thereby strengthening the company’s balance sheet.

Workers will be guaranteed job security while other creditors, such as suppliers of goods and services, would continue doing business with the company.

Aurifin is also proposing the sale of the company’s non-core assets to raise working capital.
Debt-equity could be mobilised but this may be difficult, owing to the liquidity challenges obtaining in the economy.

At the moment, David Whitehead will score low marks on credit rating because of its well-documented challenges. It is envisaged that production would start at the spinning division in Kadoma.
Spinning involves the conversion of cotton lint into yarn that could be sold on the local and export markets.

Other production divisions such as weaving, dyeing and hosiery require intensive refurbishment of machinery and equipment before resumption of production.

It is then expected that proceeds generated from the spinning division in Kadoma would be used for the refurbishment of machinery at the weaving, dyeing, and hosiery divisions in Chegutu over an estimated period of six months.