Riozim faces possible liquidation
HARARE — RIOZIM faces the threat of liquidation after its shareholders rejected the proposed rights issue and debt equity swap at an extraordinary meeting on Monday.
The EGM had been convened to consider a US$59 million rights offer and also present to shareholders a proposed debt retirement strategy.
It emerged yesterday that 47 percent of shareholders rejected the rights offer proposal while 32 percent had voted in favour of the initiative.
On the debt equity swap 31 percent of shareholders endorsed the proposal, which was rejected by 46 percent of the shareholders.
In a statement, RioZim said it had already initiated consultations with shareholders to find the way forward which will solve short-term financial issues.
“The directors have already initiated consultations with shareholders to find a positive way forward which will solve short-term financial issues and set the road map for long-term success,” said RioZim.
Of the US$59 million, RioZim wanted to raise US$29 million to clear the debt, US$11,6 million as working capital, US$13,6 million for capital projects, while US$13 million would be to recapitalise
operations.
About US$13,96 million had been earmarked for Renco, US$4,22 million for Empress Nickel Refinery and US$4,87 million for Cam & Motor Mine.
Post the recapitalisation, US$28 million would be left in more attractively priced debt.
Following the rejection of the capital-raising initiative and the proposed debt clearance strategy, shareholders might propose liquidation of the mining firm.
Analysts said shareholders had the opportunity to save the company at the EGM and by rejecting the proposed resolutions banks are more likely to press for liquidation to recover their money.
Some of the banks which advanced loans to RioZim included BancABC, Kingdom Bank, Metropolitan Bank, Trust Bank, Tetrad, ZB Bank, Ecobank, the Infrastructure Development Bank, Imara Corporate Finance, Renaissance Bank and the Afreximbank.
“This was the only opportunity for shareholders to save their investments: what it means now is that the banks are going to press for liquidation to recover their money. In the case of liquidation, creditors get their money first, before shareholders. This puts them at a disadvantage,” said an analyst close to the deal.
It is highly likely that the banks will go for liquidation, considering the loans advanced to the mining company were depositors’ money. They prefer the cash rather than becoming long-term shareholders.
The total debt currently amounts to US$57 million with the principal at US$30,15 million and interest of US$26,85 million.
At the end of the full year to December 2010, total borrowings amounted to US$49 million, with the principal at US$34 million and interest of US$15 million.
In 2009, it amounted to US$26,5 million and was split US$22 million US$4,5 million.
Finance director Mr Emmerson Mungwariri recently said it was “common knowledge” the ZSE-listed resource firm was heavily borrowed, “threatening the going-concern status” of the group.
He acknowledged debt-ridden RioZim was “technically insolvent”, but he pointed out that its balance sheet “did not capture the assets of the group”.
It also understood that some of the banks money owed would soon file for the company to be placed under judicial management.
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on December 8, 2011. Filed under Financial News.
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