adminorder for provisional judicial management.
The order was granted last week, with Mr Christopher Maswi of Fairvalue Management Consultancy nominated as the provisional judicial manager.
The company share was last offered at US0,17c.
Steelnet, whose total liabilities stood at US$4,6 million by the end of May this year, opted for a voluntary judicial management to allow injection of fresh capital by shareholders through a US$3,4 million rights offer.
Its main shareholders control over 86 percent and these include FBC Pension Fund which owns 29 percent, Equivest Nominees with 11 percent, SMM Holdings with 8 percent, Local Authorities Pension Fund and
NSSA with 6,4 percent and 5,5 percent respectively.
“It is just equitable that the company be placed under the provisional judicial management to allow working capital to be injected . . . to revive the fortunes of the company as opposed to letting individual creditors to sell in execution items or properties so far attached at the expense of other creditors,” read part of an High Court affidavit.
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 also 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 been failing to operate profitably.
Last year, shareholders attempted but failed to raise about US$6 million because the main shareholder could not follow its 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 judicial management is to enable a company suffering from temporary setbacks to turn around. The judicial manager, who is supervised by the Master of the High Court in running the affairs of the company, replaces the management in the form of a board of directors.
When a company is placed under judicial management, it enjoys a moratorium of debts in that in terms of Section 130 subsection 3 of the Companies Act, all actions and proceedings and execution of all writs, summons and other processes against the company will be put on hold.
The breathing space given to the company by this moratorium allows for the formulation of a rescue package and guarantees the continued operations of the firm in the absence of the pressing creditors.
The judicial manager also opens the company to opportunities for fresh capital from shareholders without any threat from creditors.
In its audited financial results for the full year to December 2010, Steelnet suffered a US$7,2 million loss before tax and loss attributed to shareholders of US$5,2 million.
Last year, a local bank obtained a warrant of execution against movable property of the company for the recovery of an outstanding loan.
Steelnet operates Tube & Pipe, which produces seam-welded steel pipes, BMA Fasteners, which makes mild steel industrial fasteners and mining bolts.
It also owns Hastt, which makes tractor and animal-drawn agriculture implements.
Online Reporter