Source: US$21m legacy debt weighs down PPC Zim – The Zimbabwe Independent March 15, 2019
PPC Zimbabwe Ltd is saddled with a US$21 million legacy debt to PPC South Africa which awaits repatriation as the group says the Monetary Policy Statement, presented on February 20, has kindled hope among foreign investors.
By Melody Chikono
Last month, central bank governor John Mangudya announced the establishment of an inter-bank foreign exchange market to formalise the trading of Real-Time Gross Settlement balances and bond notes with US dollars and other currencies with the initial RTGS dollar to US dollar rate pegged at 1:2,5.
PPC Zimbabwe was stuck with R896 million (US$64,2 million) due to its parent company after the local company failed to remit rights issue proceeds and other amounts due to the Johannesburg Stock Exchange-listed construction materials manufacturing group.
In an update after the Monetary Policy Statement, PPC said it awaited the Public Accountants and Auditors Board (PAAB) to pronounce the impact of the MPS, in particular the determination of whether the effective date of conversion to the RTGS$ is October 2018 or February 2019.
While PPC reported a cash balance of US$63 million at the end of September 2018, PPC says the figure was reduced was reduced to US$60 million by a debt repayment at the end of February 2019.
“PPC has reviewed the monetary policy statement issued on the 20 February 2019. The impact on the group is as follows: 1. The functional reporting currency will be the RTGS$. A full impact assessment, including systems alignment is underway.
“The initial rate of 2,5 RTGS$:1 US$ applies only to a portion of the US$60m cash balance, amounting to US$30 million-US$35 million. The remaining balance, including US$16 million in dividends and US$5 million rights offer proceeds, qualifies as legacy debt due to PPC RSA which is awaiting repatriation,” PPC said.
Meanwhile, the group announced that in terms of group liquidity, PPC Zimbabwe is excluded from covenant calculations.
“Looking ahead PPC Zimbabwe’s maintains a good relationship with the Zimbabwean monetary authorities and will persist in engaging the regulators and monitoring developments. The business continues to implement strategies to protect its financial position and utilise regulatory channels to repatriate funds where possible,” PPC noted.
In its interim financial results for the six months to September 30 2018, PPC group CE Johan Claassen said the amounts split as R510 million (U$36,5 million) in September 2017 and R466 million (US$33,4 million) in March 2018 were classified as cash and cash equivalents after the group failed to access the funds due to restrictive laws on transfers.
Zimbabwe is experiencing an acute shortage of foreign exchange that has seen foreign investors failing to remit dividends, capital gains and principal on the local exchange.