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Business Reporter
THE Zimbabwe Asset Management Company, a subsidiary of the Reserve Bank of Zimbabwe has agreed to acquire some RioZim’s debts amounting to about $33,7 million. ZAMCO was established to acquire, manage, restructure or dispose non-performing loans.

In terms of the proposed transaction, subject to shareholder approvals, the indebtedness of RioZim arising from the purchase of non-performing loans will be restructured through issuance of cumulative redeemable preference shares with a coupon rate of 9 percent per annum payable bi-annually, said RioZim said in a note to shareholders.

The debt restructuring comprises predominantly of short term debt, which does not match the cash flow generating capacity of the company. RioZim average cost of debt has been in excess of 21 percent per annum. But under the proposed transaction, the costs of the debt will come down to 9 percent per annum, the ZSE listed firm said.

Over the past three years, RioZim managed to lower its debt from about $58 million to $43,1 million in June this year, despite paying over $52 million towards the debt. In other words, the company paid about $36,3 million in interests and bank charges alone.

“This transaction will result in numerous benefits for the company including reduced costs of borrowings, improved current ratios and improved liquidity for key operational activities as well as various capital expansion projects,” said the company.

RioZim is divided into five distinct business units — RioGold, RioBase Metals, RioChrome, RioDiamonds and RioEnergy.

RioZim currently operates the Renco Gold mine in the south east of Zimbabwe, the Cam & Motor gold mine in Kadoma, the Marnatha Ferrochrome Refinery in Kadoma and the Empress Nickel Refinery near Kadoma.

RioZim said debt restructuring will give the company a five-year period to retire the debt. As a result, liquidity ratios and gearing are expected to improve significantly as the short-term debt had weakened the company’s balance sheet, said the company.

“The restructure of the debt compliments the turnaround strategy of the company and helps secure the company’s future.

“RioZim is at the centre of economic activity in all the areas in which it operates and employs in excess of 2 000 workers.

“The company remain a significant gold producer of gold and contributes in many ways to the fiscus,” said Rio.

An extraordinary general meeting will be held on January 21 next year.

ZAMCO has to date acquired $242 million worth of non-performing loans. It is believed that the process will free up funds, with NPLs estimated at $577 million, from banks into productive sectors of the economy.

The RBZ had noted with concern that NPLs, which reached a peak of 18 percent in September 2014, had caused banks to scale down on new loans.