Truworths Limited, under corporate rescue, is set to be taken over by a consortium led by Valfin Investments, a local manufacturer and distributor and current shareholders will be paid $1 for their shareholding.
The Valfin-led consortium will take over the management of the business and will inject US$2 million into merchandise and renovation of all retail locations to enhance the overall shopping experience for customers.
The investors will also make an acquisition and deployment of a retail management system to all stores to streamline inventory management and enhance retail point-of-sale operations.
Crowe, in a proposed corporate rescue plan (CPR) circular, said following the placement of Truworths Zimbabwe under corporate rescue, a number of prospects indicated an interest in being considered investors in the business.
“The CRP then held meetings with the prospective investors and provided information that included both financial and non-financial information and the prospective investors were then requested to submit their offers.
“The prospects were to be assessed on the basis of both the financial and the qualitative factors for the provision of a sustainable business model going forward.
“It is on the basis of this assessment that the Valfin Investments (Private) Limited-led consortium bid was considered acceptable,” Crowe said.
Valfin is a player in the clothing manufacturing industry and since opening its business in 2012, the company has experienced consistent growth and success.
According to the circular, a minimum of US$2 million will be injected into the business by First Mutual Microfinance (FMM) by way of taking over and managing the debtors book.
At the time of being placed under corporate rescue, the group was technically insolvent, with the initial statement of affairs indicating a net liability position of US$994,321 at a time when 85 percent of the group’s sales are on credit.
According to the CPR, the consortium capital injection will be done over a period of six months, whilst FMM will grow in line with the growth of the business.
The creditors and CRP expenses will be paid from the operations and assets of the business, and Bravette Manufacturing (Private) Limited, a subsidiary of Truworths, will be utilised to settle supervisory employee liabilities such as those of managerial and executive staff.
“The liabilities portion relating to NEC employees together with corporate rescue expenses will be floated as a debenture being paid or liquidated between months seven and 12 from the date of Corporate Rescue Plan adoption.
“All other creditors will be issued debentures, which will be liquidated in three equal instalments, being months 12, 18, and 24,” reads part of the circular.
The circular highlighted that post-commencement creditors to 30 November 2024 shall be included in debentures and the debentures shall accrue interest at 8 percent per annum.
Above all, Truworths shall be delisted from the Zimbabwe Stock Exchange (ZSE). According to the CPR, Truworths offers a unique opportunity that aligns closely with Valfin’s strategic growth objectives.
“As a clothing manufacturing company, Truworths presents a potential avenue for forward integration, enhancing operational efficiencies and expanding value chain capabilities,” reads part of the circular.
According to the proposed CPR, Valfin’s involvement in the business includes investment, restructuring, and revitalisation of the business through the creation of strategic partnerships, brand investment, and the revamping of stores in order to create an ideal shopping environment.
Truworths corporate rescue was effective 7 August 2024, together with its subsidiaries, namely Topic Stores and Bravette Manufacturing Company.
In a corporate rescue notice last year, Crowe said during the corporate rescue proceedings as provided by Section 126 of the Act, no legal proceeding, including enforcement action, against the company, or in relation to any property belonging to the company, or lawfully in its possession, may be commenced or proceeded with in any form without the authority of the corporate rescue practitioner.
The first meeting of creditors and members of the company was held on the 28th of August 2024.
At the time of being put under a rescue plan, there was inadequate liquidity to fund the stock and the debtor’s book, resulting in suboptimal sales, which negatively impacted cash flows, and ultimately the business could not meet the cash flow performance.
Among other things, the group has been failing to fully cover its payroll obligations for the 16 months prior to corporate rescue.
A shareholder meeting to approve the plan will be held on the 25th of February 2025. – Business Weekly
