Zimasco seeks six-year relief on debt interest

Zimasco seeks six-year relief on debt interest

BULAWAYO, August 29 (The Source) – Zimbabwe’s largest ferrochrome producer, Zimasco, currently under provisional judicial management, has approached banks it owes $35 million for a six and half year moratorium on interest on the pre-judicial management debts.

Zimasco, majority onwed by China’s Sinosteel, applied for judicial management to protect its assets from creditors who wanted to attach the company’s properties and was placed under provisional judicial management by the High Court of Zimbabwe on June 3 2016. The company owes creditors a total $181 353 847 million against its total asset base of $185 164 022 million.

According to the company’s provisional judicial management report, provisional judicial manager Reggie Saruchera says the company is able to return to viability in the next 6 years if it is protected from creditors while implementing the turnaround plan.

“We are negotiating settlement terms with creditors in order to facilitate the re-construction and re-organisation of the company. To this end, within the re-structuring plan we are negotiating a moratorium on interest on the pre-judicial management debts,” he said.

Saruchera added that if the banks do not support this arrangement, the company will engage the Reserve Bank of Zimbabwe (RBZ) debt assumption vehicle the Zimbabwe Asset Management Company (Zamco).

The proposal is not likely to be smooth-sailing, as banks accuse Zimasco of not being honest and upfront about its plans to be placed under administration.

According to the report, of the five banks owed, BancABC is the largest creditor at $11. 960 million, followed by Nedbank at $10 198 million.

Security placed on the BancABC facility includes a negative pledge on assets and unlimited guarantees by Zimasco Holdings and Shangani Exploration and a $15 million Notarial Special General Covering Bond over a portion of the slag dump.

Nedbank has a security the Pledge and Cession Agreement on stock held at Maputo and $10 million Notarial Special Covering Bond over a portion of the slag dump.

CABS is owed $8 098 million and has a $10 mln guarantee from Shangani and Zimasco Holdings and the $10 million Notarial Special Covering Bond over a portion of the slag dump.

MBCA and Stanbic are owed $3 423 million and $1 056 371 million respectively and MBCA has as security the $4.5 million Special Notarial General Covering Bond over a portion of the slag dump while Stanbic is guaranteed by a $1.5 million pledge over a portion of the chrome ore fines dump in Kwekwe.

According to Saruchera in the report, the ferrochrome giant can be turned around to profitability under the six and half year turnaround plan.

The plan aims to place the company as a low cost producer which will survive even at a time when chrome prices lowers.

Saruchera said a number of reasons contributed to the failure of the company chief among them declining revenues as result of drop in global ferrochrome, drop in furnace capacity utilisation and increased operating expenses.

In addition to that, finance costs and the government’s ban on chrome ore sales which limited the company’s options for sources of revenue, but government has since lifted the ban.

“Due to persistent losses, the company suffered from an acute shortage of working capital and the borrowings attracted interest rates ranging between 10% – 13% during the period 2011 to 2015,” he said.

Meanwhile, Saruchera said the lifting of the ban on chrome ore sales provides a source of other revenue at a time international prices are firming.
He said the company has since secured an export permit of 240 000mt per annum and to date 29 000 mt stockpile of high grade chrome ore has been sold.

Zimasco has capacity to produce more than 20 000 mt per month of high grade concentrates for export.