CFI Holdings has signed a memorandum of understanding (MoU) with banks providing a framework to be used in a land for debt swap deal as the agro-industrial concern moves to reduce its short term borrowings.
The MoU was signed on Wednesday and a valuation of the land has begun, two sources familiar with the transaction confirmed.
CFI owes local banks US$13,3 million and another US$3 million to other local financiers.
It is understood that valuation of the land would commence soon. The land, measuring 953 hectares, is held by CFI's subsidiary, Crest Breeders.
At CFI's last reporting date in September, the land was valued at US$40 million.
Residential and commercial property consultancy firm, Knight Frank, valued the land at more than US$70 million.
Sources said last week that some banks were keen to take up the land saying CFI had taken long to repay the loans.
"Others are looking at the land as opportunity to venture into mortgage business and take advantage of incentives put in place by the ministry of Finance to stimulate housing development," a source said.
A number of banks are turning to mortgage banking because the business has tax benefits as building societies are exempted from taxation.
The central bank extended tax breaks on profits of banks that extend mortgage lending to the market.
The remaining land will be turned into low cost residential development projects to plug the housing backlog.
Housing provision has been seen as a key pillar under Zanu PF's economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset).
Under Zim Asset, government plans to construct 125 000 housing units by 2018. The country's housing backlog stands at 1,5 million.
At the group's meeting of shareholders two weeks ago, CFI chief executive officer Steve Kuipa said the debt rationalisation would help realign the gearing to levels commensurate with the streamlined operations for the group. He said it would also help to ameliorate the recapitalisation requirements for CFI.
In the five months to February 28, 2014 CFI said revenue had declined by 9% to US$39,4 million from US$43,1 million recorded during the same period last year.
It said margins had eased by 1,2 % during the period due to the impact of restrained margins in the poultry and specialised divisions.
CFI said the tight liquidity conditions had affected the disposal on the group's non-core assets.
CFI wants to dispose of a property in the retail division which would see the group raise about US$1,2 million.
It also wants to dispose of various plots and properties in the poultry division worth US$1,7 million.