Zimglass secures Malawi investor to inject $10mln as firm restructures debts

Zimglass secures Malawi investor to inject $10mln as firm restructures debts

By Chipo Musoko, HARARE, March 30 (The Source) – A potential Malawian investor has set up a fund to inject $10 million into the country’s sole packaging glass manufacturer, Zimglass  and negotiations for its takeover have reached advanced stages, its judicial manager has said.

The company which was placed under judicial management in August last year, remains closed but sales scrap metal and soda ash to fund security operations.

Its assets stood at $19,2 million as at December 31 while its liabilities were at $31,2 million.

At the last meeting at the High Court in October last year, creditors, mainly  banks that are owed $11,6 million gave the judicial manager, Winsley Militala of Petwin Executor and Trust six months to find a suitable investor or face liquidation.

Addressing creditors at the High Court last Wednesday, the judicial manager, represented by David Chitengu told creditors that they were in discussions with a potential regional investor.

The Malawi registered consortium, comprising an international bank, a regional bank, venture capital company and individual investors had since established a fund for Zimglass.

“The investor put $10 million into the fund to invest in Zimglass, to conduct an audit, provide initial capital and for financing a scheme of arrangement with unsecured creditors,” he said.

Although Chitengu declined to disclose the name of the investor saying that this would be done once a due diligence had been completed, he told anxious creditors that at least $2 million would be set aside for a scheme with unsecured creditors.

“These negotiations are progressing satisfactorily and you will see them (investors) in the country to conduct a facility tour. We signed a non-disclosure agreement with the company,” he said.

“They have reassured us that they are doing ground work to address the issues cited as reasons for failure of Zimglass, that is securing off take agreements with customers.”

Chitengu said the investor was also in discussions with a potential customer, an international brewer who is currently bottling in the region.

“Those negotiations with the brewer were held at a high level and should the deal goes through, it will yield desired results,” he said.

Apart from that, he said, the company was also eying supplying the local market and would increase its installed capacity to 34,000  tonnes of glass from the current 28,000 tonnes.

Pressed for comment on when the investment would take place, Chitengu said after the facility visit in the next 30 days, the investor will meet with the shareholders and come up with proposal which would be tabled for discussion and appealed for another six months extension.

However, creditors said it was too long while some expressed concern about the anonymity of the investor.

“There seem to be some concrete investment before due diligence. Can we be bound to believe that if we give you six months, it will happen (investment)? Let him come. We need feedback in one and a half months because six months is too long,” said one creditor.

Chitengu said the investor, who had a huge appetite to take over the company  had asked for information on how much it will cost to restart the company and had even upped the figure given to him after conducting some low level research.

“Within the next 30 days we will complete the first stage and in following month he will give us feedback. We will report back in two months,” he said.

He said the judicial manager held a meeting with the major shareholder (Industrial Development Corporation of Zimbabwe) over the debt overhang with creditors such as FBC Bank.

“The debt to FBC of approximately $1,9 million is currently being dealt with. FBC are invoking their rights against the guarantor of the loan, IDC. A settlement of the debt through a debt-for-land swap is currently underway,” read a report to creditors seen by The Source.

The shareholder was also settling the loan to IDCSA worth $1,3 million which was obtained through Agribank, according to the report.

“As for the remainder of the bank debt, the respective banks have been advised to enlist on the ZAMCO (a central bank bad loan special purpose vehicle) scheme that is adequately securitized. This way, Zimglass’ liability will be to the central bank and it will be of a long-term nature,” read the report.

The judicial manager said this would help to restructure the balance sheet “considerably.”

“Approximately $3,2 million in liabilities to the banks would have been removed and the remaining $8,5 million converted to long-term loans,” Militala said in the report.

Zimglass manufactures glass packaging material for alcoholic beverages, sparkling beverages, food, liquor and pharmaceutical segments. Its major domestic customers include Delta Beverages, African Distillers, Mutare Bottling Company, Straitia Investments, Olivine Industries, Datlabs and E. Snell and Company.

It was established in 1963 as a subsidiary of Consol Glass and became an Industrial Development Corporation of Zimbabwe (IDCZ) subsidiary in 1984.