STRUGGLING Zimbabwe Stock Exchange (ZSE)-listed gold miner, RioZim Limited, will next week ask shareholders to approve its plan to restructure short-term debts amounting to US$33,8 million into long-term debts through the issuance of cumulative redeemable preference shares, the Financial Gazette’s Companies & Markets has learnt.
Shareholders will meet on January 21, to discuss the restructuring plan.
Under the plan, the Reserve Bank of Zimbabwe’s subsidiary, the Zimbabwe Asset Management Corporation (ZAMCO), will acquire RioZim’s non-performing loans (NPLs) in exchange for preference shares.
The proposed transaction, if approved, would see RioZim converting 10 million unissued authorised ordinary shares to unissued authorised cumulative redeemable preference shares to be issued to ZAMCO, which it will hold (the papers/instruments) for the next five years.
In a letter to shareholders dated December 24, 2015, RioZim chairman, Lovemore Chihota, said the extraordinary general meeting of the members of RioZim would be held in Harare.
“In terms of the proposed transaction for which the company seeks shareholder approval, it is proposed that the indebtedness of RioZim to ZAMCO arising from the purchase by ZAMCO of the NPLs be restructured through the issuing of cumulative redeemable preference shares with a coupon rate of nine percent per annum payable biannually.
“Accordingly, the company seeks approval from its shareholders to convert 10 000 000 of its unissued authorised ordinary shares into 10 000 000 unissued authorised cumulative redeemable preference shares of US$0,01 (one United States cent) each to be issued to ZAMCO at a premium of US$3,36721 per share on terms and conditions contained in the memorandum of agreement.
RioZim has been battling to clear its debt for the past three years.
The miner, however, managed to reduce its debt from US$58,8 million to US$43,1 million.
The restructuring of the debt will give RioZim a five year reprieve to retire it.
In turn, ZAMCO will have one seat on RioZim’s board of directors as long as the preference shares remain unredeemed. However, the member will not have voting rights.
The shares would have a coupon rate of nine percent per annum payable bi-annually.
The restructuring of the debt would compliment the company’s turnaround strategy and help secure the company’s future.
The transaction would result in the company’s liquidity ratios and gearing improving significantly as the short-term debt had weakened the company’s balance sheet.
RioZim has been battling high gearing levels arising from short-term debt with unsustainable interest rates of up to 21 percent per annum.
Since 2011, the company has paid in excess of US$36 million in interest and bank charges alone.
The debt has hamstrung the company in terms of financial flexibility.
For the six months to June 30, 2015, RioZim reported a net loss of US$7 million, compared to US$7,5 million recorded in the same period in prior year.
Its revenue narrowed to US$23,1 million from US$39,4 million recorded in the same period in prior year.
The company employs more than 2 000 workers.
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