Cottco considers govt take over proposal

By Ndakaziva Majaka

HARARE – Cottco Holdings Limited (Cottco) shareholders are meeting next month to consider government’s proposal to take over the struggling company’s debt and convert it to equity.

The agriculture concern’s acting company secretary, Petros Piki, said shareholders will decide Cottco’s fate at an Extraordinary General Meeting (EGM) slated for November 5, 2015.

“The government of Zimbabwe is considering taking over Cottco debt and convert it to equity. If this is consummated, it has material implications on current shareholders, thus the need for the EGM,” Piki said.

The acting company secretary noted that the shareholders will also discuss the impact or dilution of current shareholders if government was to assume Cottco debt and take up shareholding in the ailing company.

Reports indicate that the said transaction will see conversion of debt amounting to $56 million into equity.

Piki said part of the meeting agenda was a management presentation of the status of the company outlining a turnaround strategy.

“The agenda comprises of a presentation of discussion of the forensic audit findings by the board as well as the presentation on the form of shareholder support expected,” he said.

Through the National Social Security Authority, government holds about 22 percent in Cottco.

This comes as in his State of the Nation address President Robert Mugabe said government was set to revive Cottco to restore viability of the cotton industry.

Cottco, which registered a $30,2 million loss in the full year to March 2015, from a profit position of $14,9 million in prior comparable, is also seeking for a new partner to inject fresh capital following the collapse of talks with the China-Africa Development Fund collapsed.

Once the largest cotton company in Zimbabwe, Cottco has been struggling with a legacy debt of over $41 million since dollarisation in 2009.

The company’s shares were suspended from trading on the Zimbabwe Stock Exchange in November last year after the troubled group applied for provisional judicial management to the High Court.

The group managed to reduce the debt after disposing of its shareholding in two subsidiaries, Olivine Industries and SeedCo.

Cottco has since suspended its application for judicial management and is talking to lenders about reorganising its debt, the company said in a document sent to investors in March.

The company, which started as the Cotton Marketing Board in 1969, was sold to private investors in 1994 and began trading on the bourse in 1997.

Cottco’s executive chairman Douglas Ncube said the agricultural concern’s revenue in the full year to March declined by nine percent to $38,3 million.

However, finance costs decreased 40 percent to $8 million on pre-finance contracts, liquidation of idle assets and reduced costs. Daily News