LOCAL consortium led by clothing player, Valfin Investments (Private) Limited, has made a US$5,06 million offer for troubled clothing retailer, Truworths Limited, which is currently under corporate rescue, it has emerged.
In August last year, Truworths announced that it had entered corporate rescue in terms of Section 122 of the Insolvency Act, amid a tough operating environment that had resulted in an influx of cheap second-hand clothing into the country.
Professional services firm, Crowe Zimbabwe, which is handling Truworths corporate rescue proceedings, revealed that the firm’s total debt is US$3,27 million. Of this amount, US$2,06 million is net liabilities, while US$1,04 million is related to the provision for severance pay to employees.
“Following the placement of Truworths Zimbabwe Limited under corporate rescue, a number of prospects indicated an interest in being considered investors in the business. The corporate rescue practitioner held meetings with the prospective investors and provided information which included both financial and non-financial,” Crowe said in an update on Truworths corporate rescue update yesterday.
“The prospective investors were then requested to submit their offers. The prospects were to be assessed on the basis of both the financial and the qualitative factors for the provision of a sustainable business model going forward. It is on the basis of this assessment that the Valfin Investments (Private) Limited-led consortium bid was considered acceptable.”
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Valfin is a player in the clothing manufacturing industry.
“Since opening its business in 2012, the company has experienced consistent growth and success,” Crowe said.
According to the offer made by Valfin, capital worth US$2 million will be injected by the consortium.
Further, a minimum of US$2 million will be injected into the business by First Mutual Microfinance by way of taking over and managing the debtors book.
“Consortium capital injection will be done over a period of 6 months, while First Mutual Microfinance will grow in line with the growth of the business. The creditors and corporate rescue practitioner’s expenses will be paid from the operations and assets of the business,” Crowe said.
“Bravette Manufacturing (Private) Limited, a subsidiary of Truworths, will be utilised to settle supervisory employee liabilities, that are, those of managerial and executive staff. The liabilities portion relating to NEC (National Employment Council) employees together with corporate rescue expenses will be floated as a debenture being paid or liquidated between 7 and 12 months from the date of corporate rescue plan adoption.”
All other creditors will be issued debentures, which will be liquidated in three equal installments, being 12, 18, and 24 months, Crowe said.
“Post commencement creditors to 30 November 2024 shall be included in debentures. Debentures shall accrue interest at 8% per annum,” it said.
“Truworths shall be delisted from the Zimbabwe Stock Exchange (ZSE). Current shareholders shall relinquish their shareholding for one dollar. New investors take over management of the business.”
The offer by the consortium totals approximately US$5 067 172.
Truworths opened in 1957 and operates as a clothing and apparel retailer.
The clothing retailer listed on the ZSE in 1981, operating from 14 retail outlets comprised of Truworths Stores, Topic Stores and Number 1 Stores.
At its peak in 2001, the group operated 101 stores across the country. However, years of financial distress related to the rise of a booming second-hand clothing informal market and exchange rate volatility has resulted in the retailer downscaling to 26 stores nationally as of July 2024.
