DAVID Whitehead Textiles (DWT) intends to “immediately” restart operations at Chegutu factory after several years of intermittent operations, following acquisition of the company’s majority shareholding by Agri Value Chain Zimbabwe (AVCZ).
This comes after electricity was restored at the Chegutu factory while some raw materials have already been procured in preparation for the resumption of operations, judicial manager Knowledge Hofisi said in a report filed at the High Court early this week.
Two crucial meetings for creditors and shareholders are expected to take place on July 15 and 16 at which the judicial manager will present audited financial statements while AVCZ will outline its rescue plan through a Scheme of Arrangement.
AVCZ is owned by Mr Praduman Kumar Ganeriwal, whose business interests include cotton farming, ginning and cooking oil production in and outside Zimbabwe.
The shares acquired by AVC were previously owned by Elgate Holdings, which lost its 51 percent equity after it failed to fully pay for the shares more than a decade after signing a share subscription agreement with the former ZSE listed firm.
The agreement was terminated in May this year for “non-performance” by Elgate after the High Court ordered the concession for the purchase of shares be revoked.
In terms of Section 30 of the company’s articles of association, “any shares forfeited shall be deemed to be the property of the company, and the directors, may sell, re-allot or otherwise dispose of the same in such a manner they think fit”.
“The judicial manager is confident that AVCZ has both financial capacity and technical expertise to revive DWT operations as it has a significant presence in Zimbabwe, Malawi and Zambia where it is carrying out cotton value activities,” said Mr Hofisi.
“In line with the Government’s vision of reviving the economy, the judicial manager came to the realisation that DWTL is an integral part of the cotton value chain in Zimbabwe.
“A fully functional DWT is an imperative in creating much needed employment and providing support in various other ways to local communities,” Mr Hofisi added.
DWT used to produce about 20 million metres of fabric per year while directly employing 3 000 workers and thousands in down and upstream industries.
Mr Hofisi said the acquisition of DWT by AVCZ, which is related to Parrogate, also a secured creditor, was a welcome development as it stopped Parrogate from pursuing litigation.
“There has been reasonable apprehension that litigation by Parrogate could have had negative ramifications on the resuscitation efforts as the debt is secured against company properties,” said Mr Hofisi.
“The debt owed to Parrogate arose from a tolling arrangement executed during the first judicial management in 2006 and has remained outstanding for almost 13 years.”
Part of the proceeds from the sale of DWT stake ($5,4 million) was used to pay some of the debts including interest bearing $2 million loan facility by the Zimbabwe Asset Management Company, a subsidiary of the Reserve Bank of Zimbabwe.
Another $650 000 was paid to a creditor who, in March this year who had secured an execution order to attach 40 immovable properties of DWTL in Chegutu.
“The settlement of these two debts has to some extent reduced the legal risks of the company.”
DWT woes began around 2004 when the company-weighed down by operational challenges and saddled with huge debts was first placed under judicial management.
Since then, it remained under the High Court-sanctioned reconstruction under three different administrators.
Tudor House Consultancy was appointed in 2004 and presided over the affairs of the company until 2008. Two year later, Elgate applied for another judicial management as fresh operational challenges including mounting debts re-emerged.
Petwin Executors, was appointed the judicial manager of the company. The sun almost set for form DWT after Petwin recommended liquidation of the company.
In his report, Petwin said the reconstruction was not “serving any purpose” as no investor was prepared to inherit the company’s huge debt. He said access to capital was a “virtual impossibility” as banks had minimal funds to lend. The little funding available was on a short-term basis which was not aligned to DWT trading cycles.
“We believe that the challenges that resulted in the placement of DWT under business rescue plan have been removed,” said Mr Hofisi.
“On that basis, creditors and members are requested to support the rescue plan as it will have far reaching perspective in the history of the company.”
