admincapital and reorganising the company operating structures,” he said in an e-mailed statement.
“Steelnet was not adequately capitalised after the Zimdollar era and the group structures were too heavy, considering the nature of the business.”
Judicial management is essentially a process that gives prime consideration to rescuing distressed companies as a going concern through the formulation and implementation of a reconstruction plan.
In other words, the process guarantees continuation of operations.
Mr Maswi said Steelnet could not qualify for liquidation, considering the high demand for its products, which include agricultural implements, steel pipes and domestic and industrial steel fasteners.
“The major issue is capital raising and we will be looking at various options of raising money and the amount required is being worked on.”
Steelnet was suspended from trading on the Zimbabwe Stock Exchange in October last year after shareholders applied for provisional judicial management order to allow for a proper turnaround.
When it was placed under court-ruled judicial management, Steelnet had liabilities amounting to US$4,6 million and was under pressure from creditors who had sought court orders to attach its assets.
Last year, a local bank obtained a warrant of execution against Steelnet’s movable property for the recovery of an outstanding loan.
Steelnet, which operates three business units, saw its working capital eroded during the hyperinflation period between 2007 and 2008. The liquidity crunch arising from the introduction of the multi-currency system created a further burden on the viability of the company.
Efforts to raise working capital were unsuccessful due to high interest rates and the company has ailed to operate profitably. Last year, shareholders attempted but failed to raise about US$6 million because the main shareholder could not follow their rights.
In full-year results to December 31, the company indicated that due to successive losses, its ability as a going concern was uncertain.
The management also contemplated selling Tube & Pipe, one of its subsidiaries, to raise working capital to recapitalise some of the divisions.
While its product were broadly in demand locally, given growth in the mining and agricultural sector and with exports comprising 25 percent of revenue, Steelnet suffered from a mismatch between the repayment
periods of short-term borrowings and long leads time in raw material procurement.
Steelnet operates Tube & Pipe, which produces seam-welded steel pipes and BMA Fasteners, which makes mild steel industrial fasteners and mining bolts.
It also owns Hastt, which makes tractor and animal-drawn agricultural implements.
Online Reporter