By Chipo Musoko, HARARE, April 8 (The Source) – Zimbabwe’s largest commercial bank, CBZ, which is owed $4,5 million by a defunct cotton ginning firm, Insing Investments on Wednesday voted to save the company from liquidation after the judicial manager said the company could be revived and pay creditors.
The cotton firm with a ginnery in Rushinga ceased operations in 2013 and was placed under provisional judicial management of Grant Thornton the following year due to declining revenue attributed to falling cotton prices and defaulting farmers. A shareholding dispute currently before the courts worsened matters.
Insing, whose assets are worth $5 million has liabilities worth $4,9 million with CBZ being the major creditor.
Judicial manager, Reggie Saruchera through his representative, Bulisa Mbano told creditors during a meeting at the High Court on Wednesday that the company required over $7 million in the short to medium-term and had potential to be revived.
The company also owns another ginnery in Kwekwe which remains incomplete.
“We need to secure working capital to implement the proposed business plan. There is still a market for cotton, though limited, and we can venture into cotton seed oil and cake and leverage on the Kwekwe assets. We recommend that the company be placed under final judicial management,” he said.
Mbano said if the company failed to secure investors by year-end, the firm would be liquidated.
“If we miss out this season, then there will be no funds for the next season and we then have to proceed with liquidation,” he said.
Creditors including CBZ, the secured creditor voted to save the company after being told that should they opt for liquidation, secured creditors would get 62 percent of proceeds while unsecured creditors would get nothing.
Mbano said the judicial manager had disposed some stocks of cotton lint to finance recurrent expenditure while seeking investment. Another $400,000 was required to complete the Kwekwe ginnery.
After the vote to save the company, the judicial manager said he would look for new investors, purchase free cotton and enter into a ginning arrangement with other firms as well as negotiate with creditors and financiers to reschedule loans.
“We also need to carry out an investigation to establish whether there were any fraudulent activities and to recover more assets,” he said.
During the meeting, creditors including CBZ Bank, Fawcett and Africa Online presented claims worth $4,560 million.
Zimbabwe cotton production has declined by 60 percent in the last three years as farmers abandoned the crop in favour of the better paying cash crops like tobacco.
Cotton output fell to 136 million kg in the 2013/14 season from 145 million kg the previous year, compared to 350 million kg in 2011/2012.
Players in the sector include Cottco, Alliance and the Chinese owned Sino-Zim.