World
Shame Makoshori, Senior Business Reporter
FIVE banking institutions which are owed a total of US$14 million by troubled breadmaker, Lobel's Bread, have halted lifelines to the firm but say a new investor will be announced before year-end.
CBZ Bank chief executive officer, John Mangudya, whose bank is leading a consortium of banks exposed to the bradmaker, said last week that under a new strategy put in place to rebuild the bread manufacturer, Lobels had returned to viability and had started funding its own operations.
"We are almost finalising a deal with a new investor to take over Lobel's. A deal is on before the end of the year. We cannot talk about shareholding now," he told Companies & Markets.
"In the meantime, we have a caretaker arrangement to produce bread. They are now funding production from existing operations. We cannot continue putting money when banks are owed money."
Asked to reveal the identity of the potential investor, Mangudya said: "I don't think the investor would want his name discussed in public now. But we are happy that Lobel's is now able to fund its operations."
Reports had indicated that shareholders in Lobel's were on the verge of losing control of their investment to the consortium of lenders.
The five banks were said to be within the cusp of taking over a combined 98 percent of the troubled confectionery business.
Lobel's is owned by Ceuvost Services, a consortium comprising former FBC Holdings Limited chief executive officer Livingstone Gwata, the banking group's chairperson Herbert Nkala, CAPS Holdings chairman, Freddy Mtanda and David Chiweza.
The four hold about 25 percent shareholding each in the company.
Chiweza, who is resident director at Lobel's, said they were still working on a draft framework that would see the new banks assuming shareholding in the company.
He, however, said they had not finalised the transaction, insisting he was unable to say how much shareholding the banks would claim.
"It (shareholding) is not yet finalised," Chiweza told Companies & Markets.
"Until it is finalised, we will not be able to talk about shareholding issues. The shareholder framework has been drafted and we are working on it. Until this is finalised, we cannot talk about shareholding," Chiweza added.
FBC Bank, CBZ Bank, NMBZ Bank, Metropolitan Bank and troubled Re-Naissance Merchant Bank, which is currently under curatorship, have battled to recover bailout money extended to Lobel's to finance operations since last year.
Sources said the four shareholders' combined shareholding in the firm could be reduced to about two percent.
Other creditors had begun agitating for the attachment of several assets controlled by the confectionary products manufacturer to recover their funds.
Already, several other assets have been lost to creditors who have won court judgments that paved way for the auctioning of the company's assets.
CBZ Bank, which is owed the bulk of the debt, already holds the bulk of Lobel's assets as security.
Lobel's Bakery, from which Lobel's Bread emerged, was established some 60 years ago by the Lobel family in Bulawayo, Zimbabwe.
Before then, early pioneer bakeries had produced bread by hand. Lobel's saw the need for automation and after substantial investments introduced modern production-line baking equipment.
The resulting competitive prices made bread a staple item for the city's growing population.
Biscuit production began shortly thereafter in 1954. The range of biscuits grew rapidly as production became more automated.
From the original plain range of biscuits Lobels developed a Cream range, then a Chocolate-coated range and a Savoury selection was added as the company continued to anticipate consumers' wishes.
The Lobel family sold the bread-making business to the Nkala-led consortium just after the new millennium, but they retained the biscuit business.
The biscuits business under the Lobel family has remained viable in Zimbabwe, and exports throughout the region and increasingly, abroad. Packaging quality has also kept pace with consumer expectations, from the early biscuit-tin to today's gravure-printed lines.
Its bread-making counterpart had floundered under black ownership, with acute cash flow problems, compounded by gross financial mismanagement and inefficiencies as well as ageing plant and equipment lurching it from one crisis to another in the past five years.
Reliance on banks for working capital requirements only exacerbated the bread making firms's woes .
The firm resumed operations in August after a brief shutdown.
In July, Lobel's appointed CBZ Bank and law firm DMH, as financial and legal advisors respectively as directors tried to map out ways to recapitalise without having assets attached by impatient creditors.
"We are pleased to announce that the Concept Frame of the transaction has been prepared and obtained the agreement, in principle, of the banks which are owed significant amounts by Lobel's. Trade creditors will shortly be engaged to get their buy-in before preparation of the legal and other documentation to give effect to the transaction," read part of the notice.
At its peak, Lobel's produced about 300 000 loaves per day, but output has declined to about 20 000 loaves daily.
Its bread is now largely shunned by consumers.
