THE High Court has ordered Bulawayo-based Textile Mills (1947) Limited, which is under Judicial management, to convene a creditors’ meeting to discuss recapitalisation measures, which may include the leasing of some of its properties, among other strategies to resuscitate its operations.
BY SILAS NKALA
Bulawayo High Court judge, Justice Martin Makonese gave the order on December 7, saying the meeting should be held today at the judicial manager’s offices in the city.
Judicial manager, Tapiwa Chizana had filed a court application seeking an order granting the meeting.
In his founding affidavit, Chizana submitted that he was seeking an order compelling the creditors to meet to vote on a proposed scheme of arrangement.
“Some of the factors, which caused the applicant to be placed under judicial management, were under-capitalisation, competition from cheap imports, a shortage of critical working capital and expensive short term loans capital,” he submitted.
“Presently, the company faces cashflow constraints emanating from the need to resuscitate the business through the sourcing of raw materials and paying labour and statutory costs. The profits currently being generated on a month-to-month basis are insufficient both to maintain the company’s working capital requirements and also to pay creditors both pre and post-judicial management.”
Chizana said Textile Mills owes approximately $1 million to employees and $2 million to trade and other creditors.
“The land and buildings upon which the operations of Textile Mills are situated are pledged as security over a debt that the holding company (Security Mills (Pvt) Ltd under judicial management owes the Commercial Bank of Zimbabwe,” he submitted.
“The proposed scheme was that a wholly-owned subsidiary of Textile Mills will be incorporated to carry on the business of textile manufacture. The proceeds from the leasing of properties will be distributed, first
$20 000 will be set aside to clear outstanding post-judicial management salaries and wages, 7% of net rental income will be applied in clearing long outstanding judicial management fees not withdrawn by the judicial manager to help the company stay afloat.
“Three percent of the net rental income will be set aside as trustee’s fees, 5% of net rental income will be set aside to clear post-judicial management liabilities. Eighty-five percent of net rental income will be paid to creditors on a pro rata basis waiving the order of preferences enshrined in the Insolvency Act.”
He said that the proposed scheme would benefit all stakeholders if approved.