ZAMCO to take up RioZim’s debt
RESERVE Bank of Zimbabwe’s bad debt buying company ZAMCO is set to take up ZSE-listed RioZim’s debt in a transaction which will see the unit get at least a board seat.
RioZim issued a cautionary statement which said that the company is currently engaged in a debt restructure programme. At the half year to June, the miner’s debt was at US$43,1 million while interest rates according to the group was averaging around 18 percent.
Well-placed sources said that the debt restructuring will lower the group’s interest rates to about 10 percent and in the process free up its cash flows. The new facility will have a tenure of around 7-8years.
“To protect the investment, Zamco will hold the group’s convertible preference shares which they can convert to equity if the miner defaults,” said a source.
The restructuring of the debt on better terms and long tenure forms an important part of the group’s turnaround strategy which is mainly anchored on the Cam & Motor gold mine. Since its recapitalisation which ushered in a new major shareholder the, high debt legacy and interest rates on bank debt was stifling resource allocation to improve operational performance and unfortunately this has been the major highlight of the company.
RioZim has paid well in excess of $50 million in cash over last few years to various financial institutions but the capital sum of the debt has not reduced as a result of the punitive interest costs.
However while analysts say that debt was one of the problems at the company, the current slump on commodity prices is the worst with a marginal recovery expected only in the second half of next year.
RioZim is one of the several companies that ZAMCO is targeting for ‘rehabilitation’ outside the banking sector. FinX
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