$370m Zisco debt stalls Essar deal

via $370m Zisco debt stalls Essar deal 17 September 2014

THE restarting of operations at Ziscosteel is being held up by the steelmaker’s debt overhang, but government and Essar Africa Holdings are now putting final touches to an implementation plan to resume works before the end of year, a minister said on Wednesday.

Essar, the African unit of India’s Essar Group in November, 2010 agreed to buy 54 percent in Ziscosteel in a deal worth $750 million, with the government keeping 36 percent and 10 percent to be owned by minority investors.

But the reopening of the steelmaker, now called NewZim Steel, was held up by squabbles between the partners over ownership of mineral claims.

In May this year, Essar said it would build a new 500,000 tonne steel plant at Ziscosteel for $650 million in two years after government agreed to transfer 80 percent of the rights to the conglomerate.

But addressing captains of industry and commerce at a breakfast business meeting in Bulawayo on Wednesday, the minister of industry and commerce Mike Bimha attributed the delays in restarting operations “due to the complicated nature of the deal and the government’s insistence that the investor should take-over the debts of Zisco.”

Under the original agreement Essar was supposed to inherit the company’s foreign debt which amounted to $300 million and to share the domestic debt, which amounted to $72 million then with government, based on the shareholding structure.

As of February this year, Ziscosteel’s arrears to its workers and domestic creditors has risen to $200 million after the state failed to meet its end of the deal.

“They have been delays to the operationalisation of New Ziscosteel but there is direction. In the next few weeks we will be seeing something happening at Zisco,” said Bimha.

“I will be meeting officials from Essar to put final touches to the implementation of the plan and ensure that things are being speeded up.”