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Merlin’s China funding talks collapse

Markets
Troubled textile company, Merlin, which is currently under judicial management, is seeking new investors to acquire 51% shares and recapitalise the business after a proposed funding arrangement with a Chinese firm fell through,

HARARE — Troubled textile company, Merlin, which is currently under judicial management, is seeking new investors to acquire 51% shares and recapitalise the business after a proposed funding arrangement with a Chinese firm fell through, the judicial manager said on Monday.

President Mugabe touring the  spinning plant set by Sino Zim Cotton Holdings in December last year
President Mugabe touring the spinning plant set by Sino Zim Cotton Holdings in December last year

At the beginning of this year, the Bulawayo-based textile company approached Chinese-owned Sino Zim Cotton Holdings seeking $14 million funding to revive operations, but the deal fell through.

Merlin survived liquidation over a decade ago and was placed under judicial management for the third time in December 2011. It suspended production in October 2010 to minimise losses when capacity utilisation fell to 20%.

Last year, judicial manager Cecil Madondo was tasked to seek investors following a meeting of creditors and members at the Bulawayo High Court.

The company requires $1,2 million in the short term to start production while more than $3 million will be required in the medium term (1-2 years) to purchase land and buildings as well as carry out major repairs and maintenance of equipment. More than $8 million will be required to replace obsolete machinery.

Madondo said he had been authorised by the majority of creditors to identify and invite suitable investors in Merlin pending approval to implement a scheme of arrangement by the High Court.

“The proposed restructuring will initially involve the injection of capital into the company by a new investor, who will be selected through a competitive bidding process,” he told The Source on Monday.

Merlin, which used to be one of the biggest textile companies in the country, also requires cash to pay creditors and procure raw materials.

Madondo said he would be accepting bids by June 30.

At full capacity, the plant at Merlin can process up to 120 tonnes of lint per month.

The company is sitting on a $4,3 million debt, $1 million of which is owed to workers in outstanding salaries.

— The Source