RioZim restructures debt

Published: 10 June 2013

Embattled mining firm, RioZim Limited, is restructuring its expensive debt to fend off a going concern crisis after high interest rates guzzled into profits, generating a US$5,5 million net loss during the year to December 31, 2012.

The loss was down from a US$12,2 million loss registered the previous year but remained significant to trouble the mining concern, which last year battled to placate creditors and lenders who called back their loans after default.

New board chairman, Elisha Mushayakarara, said there were prospects the business could be turned around by a new management team after "a watershed year" in which the group "faced a significant financial crisis".

Debt went down to US$44,5 million during the reporting period, from US$58,8 million the previous year, after a cash call whose proceeds were channelled towards debt reduction.

But this did little to remove the company from a going concern crisis as current liabilities exceeded current assets by US$17,6 million (2011: US$36,6 million) largely due to lingering short-term borrowings.

The average cost of debt during the year to December 31, 2012 was at 21 percent, down from 23 percent the previous year. With the planned restructuring, the cost is expected to go further down. According to a statement to financial accounts, a portion of the short-term debt was already in the process of being re-scheduled to between 24 and 36 months. A tiny portion had already been re-scheduled.

Agitated bankers and creditors had last year tried to force RioZim into liquidation after the mining company failed to repay loans. There were concerns the size of RioZim's debt was so enormous it was immutable.

However, the storm appeared to settle after a recapitalisation exercise was successfully completed in April, with a private placement of US$6,6 million to Gem Raintree Investments Limited (GRIL), a Mauritian-based investment company, and a US$5 million rights issue to existing shareholders.

GRIL was appointed the underwriter of the rights issue.

As a result of the recapitalisation, the composition of the board was changed, and a new executive management led by Ashton Ndlovu was appointed. In his report to shareholders, Mushayakarara said: "Significant inroads have been made in reducing and restructuring the debt burden; operations are showing sustainable improvement through better focus and capital expenditure and there are various exciting corporate opportunities that will expand and grow our business footprint."
- fingaz