Zamco pledges Merlin bailout

Zamco pledges Merlin bailout
Published: 20 June 2018
THE Zimbabwe Asset Management Corporation (Zamco) is in talks with Merlin Limited shareholders over a possible bailout that will assist the company to acquire new equipment to operationalise its new business model and clear outstanding legacy debts.

Although no official figures have been availed, close sources say the deal is close to conclusion and that a creditors' meeting would be called soon to bring closure to sticking matters that have stalled revival of the giant textile firm.

A letter of commitment from Zamco dated 12 June 2018 seen by Business Chronicle, and addressed to Mr Delma Lupepe, one of the key shareholders, reads: "We advise that Zamco are prepared to assist in availing funding to rescuscitate Merlin Limited provided the creditors agree on a scheme of arrangement as proposed by the shareholders."

Zamco chief executive Dr Cosmas Kanhai also confirmed the development. "I can confirm that we are working together with the assistance from Government, the Reserve Bank of Zimbabwe and the judicial manager. But I think it's too early to divulge full details now," he said.

The move to engage Zamco was reportedly an initiative of the shareholders, who are seeking lasting solutions to revamp the Bulawayo-based company.

Provision of fresh capital would greatly assist the firm to procure modern plant equipment, as existing machinery is obsolete and clearance of arrears owed to different creditors in the short term. Fruition of these recapitalisation efforts could see Merlin exit judicial management quickly and position the company to profitability once again.

The company requires at least $30 million in the next five to 10 years to revamp the whole production process and recently filed a High Court application, through its judicial manager, Mr Cecil Madondo, seeking to dispose obsolete and non-core assets to raise additional working capital.

Commenting, Mr Lupepe said the new political administration has created positive conditions for the revival of Merlin and other industries in Bulawayo.

"The new Government is genuine in working to rescuscitate and we are a perfect example. Upon revival we expect to Merlin to create 2000 jobs including downstream. The firm would also play a huge role in cotton value addition and help reduce raw exports," he said.

Merlin has already proposed a new business model with new products that include diapers and sanitary products, which are largely being imported. The firm has said it will also continue producing traditional nappies and towels for the rural market and selected clientele such as hotels.

Mr Lupepe has faced negative publicity of loan arrears he said were advanced to Merlin with him as guarantor. Some media reports had suggested the business tycoon risks being jailed or losing personal properties over failure to clear the loans.

"The problems I am facing over these loans are not personal but related to loans advanced to Merspin (Merlin) but these are being taken care of. Creditors would soon be called and their monies would be paid in a couple of weeks.

"It's unfortunate that certain quarters misunderstand their job as that of bringing down businesspeople rather than try to uplift them and aid industry revival in Bulawayo," said Mr Lupepe.

He also paid tribute to the support given by the political and traditional leadership towards pushing for the revival of Merlin. The firm resumed production in the dyeing section early this year on a lower note following the implementation of a business rescue strategy that saw one of its creditors injecting a minimum $2,1 million working capital.

The company was placed under judicial management in 2012. Going forward, Merlin has focused not only on producing napkins but a range of high quality and high demand products locally and for exports. There are also plans to set up a ginning plant that would go a long way in reducing production costs while increasing the value of the business through additional revenue from lint sales and by-products such as seed oil and animal feeds. Through the ginnery, Merlin focuses on producing and selling yarn, which is on demand locally and in the region.
- chroncile
Tags: Zamco, Merlin,


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