Zimpapers Logo

Golden Sibanda Senior Business Reporter—
Blue Ribbon Industries requires as much as US$40 million to bring the grain milling and processing company back to viability, judicial manager Mr Reggie Saruchera has said. Mr Saruchera said in an interview yesterday US$30 million to US$40 million is required to revive the heavily indebted company. As such he has already approached and obtained leave from the High Court to hold a scheme meeting of members. The meeting will discuss a whole spectrum of issues which are pre-requisites for the turnaround of the company including the huge financial outlay to revamp operations.

“The company may require between US$30 million and US$40 million, with US$15 million going to working capital. We have already started the process of preparing for the scheme meeting,” he said.

It has also emerged prospective investor, Bakhresa Group of Tanzania, has appointed a local representative to advise on the deal, with Mr Saruchera and the representative expected to discuss funding requirements and the structure of the scheme. The company is buckling under heavy liabilities and shortage of funding to support operations, which saw the company putting workers on shifts to manage costs.

The Tanzanian company will also have to find a solution to settle a US$30 million liability saddling the firm and inject fresh funding towards working capital needs.

Mr Saruchera also said preparation for the scheme comes as significant progress has been made towards securing compliance with the country’s equity laws.

“We are in the 11th hour of securing compliance (with Indigenisation and Economic Empowerment Act),” he said.
Foreign owned firms are required to hold a maximum of 49 percent of local firms, with the balance held by indigenous black Zimbabweans, unless the investor has been given a special dispensation by Government against the provision.

The scheme of arrangement will determine the course of action to be followed for the reconstruction of the grain milling and processing firm, subject to regulatory approvals.

A scheme of arrangement is a court-approved agreement between a company and its shareholders or creditors (such as lenders or debenture holders). It may effect mergers and amalgamations and alter shareholders’ or creditors’ rights depending on design.

Blue Ribbon was operating in fits and starts until the High Court placed it under judicial management two years back when output capacity fell to unsustainable levels.

It is not clear what stake Bakhresa would take, but sources said the shareholding will be determined by the amount of fresh capital the group will invest in Blue Ribbon.

Blue Ribbon faces the similar problem of crippling shortage of funding characterising local industry, which forced the company to borrow at punitive interest rates. The firm has also been battling to repay a US$2 million loan facility that was extended by PTA Bank.

Grant Thornton Camelsa advisory manager Mr Bulisa Mbano said they needed to obtain regulatory approval first, compliance with the country’s equity laws, before the firm proceeded to hold the scheme of arrangement.

“Once all regulatory approvals have been obtained we will proceed to hold the scheme of arrangement,” Mr Mbano said.
He would not reveal finer details, but said that the investor’s priorities included clearing the liabilities to creditors.

The Bakhresa Group is one of the leading Industrial firms in Tanzania, East Africa. The conglomerate started from humble beginnings with a small restaurant in the Port City of Dar Es Salaam in mid 70s, but has grown into prominent family owned business.

It has operations spread in Tanzania, Zanzibar, Uganda, Kenya, Rwanda, Burundi, Zambia, Malawi and in Mozambique. Plans are in place to spread to other countries.

The Group now boasts a turnover of more than US$600 million and employees more than 5 000 employees associated directly with the East Africa conglomerate.

Fresh funding is required to rehabilitate machinery and equipment, clear expensive debt and provide working capital. Blue Ribbon has five divisions, BRI logistics, Blue Ribbon Foods, JA Mitchells and Nutresco Foods.

Considering its brand equity, supported by popular household brands such as Chibataura and Ngwerewere, the grain milling and processing company has huge potential to return to turnaround its fortunes.