via Govt assumes Cottco $41m debt – DailyNews Live Ndakaziva Majaka • 4 December 2015
HARARE – Cottco Holdings Limited (Cottco) says government has started the process of taking over its legacy debt of over $41 million through the central bank’s non-performing loans Special Purpose Vehicle.
The latest development is aimed at reducing interest burden on the sub-Saharan Africa’s largest ginner and marketer, thereby enhancing cash-flows and profitability.
This comes after the agriculture-focused company has continued to incur significant losses over the last three years and reported a loss of $30 million for the year ended March 31, 2015. Cottco, the sole operating subsidiary of the group, had total borrowings amounting to $39,2 million in the period under review.
Of these borrowings, $16 million were overdue as at year-end and Cottco was in breach of the repayment terms.
This resulted in the group’s auditors, KPMG, throwing the firm’s ability to continue as a going concern into doubt after Cottco’s liabilities exceeded its assets at the time of reporting.
However, the company’s management said they had “a reasonable expectation that Cottco will continue in operational existence for the foreseeable future given the strong support it continues to receive from government, cotton merchants, banks and international customers”.
“Subsequent to year end, $7,2 million had already been restructured for a further three years and negotiations are ongoing for the balance, where government of Zimbabwe, through Zimbabwe Asset Management Corporation (Zamco), intends to convert all Cottco’s debts owed to financial institutions to equity, subject to relevant processes,” Cottco said on Wednesday.
Once an undisputed dominant force in Zimbabwe’s agro-industrial sector and a major employer, Cottco has hit turbulent times recently.
Last November the company applied for its sole cotton ginning subsidiary to be placed under judicial management to avert foreclosure over debts running up to $50 million.
It subsequently withdrew the application, apparently after reaching some agreement with its creditors.