PG seeks $3,5m

HARARE - Hard-pressed PG Industries Zimbabwe (PG) seeks $3,5 million in fresh capital.

The building materials manufacturer, which has been trading in the red since adoption of the multi-currency system in 2009, is in negotiations with BancABC and Old Mutual over bailout packages.

It intends to use the funds in strengthening its working capital position by purchasing additional stock.

Currently, the company’s stock mix is suboptimal, characterised by a number of slow moving lines.

Its chief executive, Hillary Munyati, told shareholders in a circular that as at September 30, 2013, PG had a negative equity position of $3,3 million.

“The company is thus technically insolvent, and unless it enters into an arrangement with creditors, it is likely to go into liquidation,” he said.

Munyati said BancABC has agreed to advance a $1,1 million loan to the company while Old Mutual had also committed to inject $1 million through a one billion share swap deal.

“The company has successfully secured buyers for $950 000 worth of properties. Sale and purchase agreements have already been signed in line with these disposals subject to the conditions precedent,” he added.

The construction firm is also in discussion with various financial institutions to secure additional $440 000.

“From a cash flow perspective, this amount will not be immediately required. However, post the balance sheet restructure that PG’s cleaner balance sheet will present opportunities for the company to secure facilities in the form of guarantees or letters of credit from local banks as required,” Munyati said.

PG — which by September 30 last year owed $16,3 million to trade and other creditors — has begun an extensive operational restructuring resulting in the merger of PG Building Supplies and
PG Timbers.

Munyati noted that if the company is successful in securing the $3,5 million capital, PG would be positioned as a lean and adaptive market player with a cleaner balance sheet and stable working capital position.

“This augurs well for the company’s recovery and growth prospects in a market which is expected to be driven by the individual home builder for the foreseeable future,” he said.

Last month, PG postponed its scheme meeting and extraordinary general meeting to align with the Zimbabwe Stock Exchange listing requirements.

The group was supposed to have a scheme of arrangement with its lenders, creditors and debenture holders as well as pursue a $3,5 million rights offer.

On the proposed creditors’ scheme, only one creditor, Sherwood International’s Zimbabwe unit Super Group Trading is secured.

PG owes $1,4 million to Sherwood which is secured by a guarantee from a local financial institution. Under the proposal, Sherwood will continue to supply the group.

The remaining creditors, owed about $16,3 million will be offered either PG ordinary shares in lieu of amounts owed at a price of $0,001 by way of private placement or a deferred payment plan to settle the amounts over a 36-month period plan.

The scheme will also seek to have debenture holders convert their debentures to PG ordinary shares. The debentures are worth $6,72 million.

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