RAINBOW Tourism Group (RTG) shareholders yesterday approved the $4,5 million rights issue at an extraordinary general meeting aimed at retiring expensive short term debt.
Report by Victoria Mtomba
Speaking at the EGM RTG chairman Joseph Kanyekanye said the company had to deal with its short term borrowings that stood at $12, 6 million as at June 30, 2012.
“The short term debt has exerted a lot of pressure on the cash flow such that the company could not repay the loans on time leading to lenders charging the company penalty rates,” he said.
“The proposed recapitalisation through a rights offer of approximately $4,5million is designed to address the group’s working capital requirements by retiring part of the $12,6 million short term expensive loans and the balance shall be restructured through a $10 million loan secured from a local lender under favourable borrowing terms.
“Successful recapitalisation will help the company.”
He said the recapitalisation would free working capital currently being channelled towards interest payments in order to finance generation of more revenue for the company.
RTG had resorted to expensive short term borrowings from local banks to finance critical capital requirements and working capital post dollarisation.
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The shareholders also approved the appointment of Tendai Madzivanyika, Douglas Hoto, Douglas Mavhembu, Shadreck Vera, Shingirayi Chibanguza and Rosa Dube to the board of the hotel group.
RTG embarked on the recapitalisation drive seeking $15 million in 2011 to retire its short-term debt and ensure the completion of refurbishments projects, but it was unsuccessful.
For the half year to June 30, 2012 RTG losses stood at $3,2 million due to huge finance costs.
The company would be releasing its financial results next month and forecasts show it will return to profitability.
Meanwhile, RTG finance director Pascal Changunda and commercial director Godfrey Pasipanodya have left the hotel group.
Changunda was at one time the acting chief executive officer before the appointment of Madzivanyika.
