Merlin judicial manager pleads with shareholders

 Merlin judicial manager pleads with shareholders
Published: 12 February 2019
MERLIN judicial manager Cecil Madondo has pleaded with company shareholders to withdraw court cases or risk the company's total shutdown.

Once listed among the largest textile companies in the country, with over 2 000 employees, the firm was placed under judicial management for the third time in December 2011.

In his progress report, Madondo said it would be in the best interests of the company and all stakeholders that the matters before the courts, including those in opposition against the chamber application for correction of citation and application for a scheme of arrangement were withdrawn forthwith as they served to increase the likelihood of a total shutdown of the company.

"In order to save the companies, the judicial manager should be allowed to proceed with his application for correction of names to pave way for potential investors to come on board. If this is not done immediately, company assets will be executed upon by OML [Old Mutual] on February 28, 2019 in terms of the High Court order granted on December 18, 2018," he said.

This comes after one of the shareholders, Delma Lupepe, filed a number of court applications against the judicial manager, which are still pending at the High Court.

Madondo said two potential investors, Cottco Pro Company and Baobab Spinning, had shown interest in the company, but the ongoing legal battles with shareholders and Old Mutual were derailing the process.

He said these investors had put as a condition that all outstanding legal issues be resolved before they could proceed with the transaction.

"The hard stance by the shareholders to hold onto companies riddled with debts is astonishing, and they should be compelled to withdraw their position to the application for correction of names to allow the companies to be protected from litigation and pave way for potential investors to inject capital in the business," he said.

Madondo urged government to give assurances to the potential investors on the security of their investments, including engaging Old Mutual and Merspin Property Unit Trust with guarantees for settlement of rentals once investors have taken over control of the business in order to save the company from collapse.

"… the best solution for Merlin is to secure long-term credible investors who can inject both working capital and capex to revamp the enterprises…. All that is required is for the shareholders to withdraw all court cases and allow the judicial manager to finalise the transaction with the potential investor," he said.

He said they had proposed to government that they approach the National Social Security Authority with a view to inject funds through acquisition of a piece of land and property owned by Old Mutual, which could be leased to Merlin to protect the company against extinction and in the process save hundreds of jobs.

The estimated open market value of the Old Mutual property is $2,4 million, while the portion owned by Merspin Property Unit Trust is estimated at $1,4 million.

"It is, therefore, our view that once the above proposed way forward is fully implemented, the company can be rescued from imminent liquidation and set on a recovery path that it deserves," he said.
- newsday
Tags: Merlin,


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